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THE  CAUSE  AND  EFFECT 
OF  MONEY. 

library 

OF  The 

LINIVERSIIY  nf  ip  


BY  henry  rawie 

Author  of 

• VAL  UE : The  First  Cause  in  Political  Economy. 

THE  PRINCIPLES  OF  A NEW  POLITICAL  ECONOMY. 


“ To  find  the  law  by  which  they  are  regulated  is  to  understand  phenomena. 

“We  of  the  present  day  have  already  sufficient  insight  to  know  that  laws  of 
nature  are  not  things  which  we  can  evolve  by  any  speculative  method. 

“ On  the  contrary  we  have  to  discover  them  in  the  facts  and  to  test  them 
by  repeated  observations  and  experiments. 

‘ ‘ The  laws  of  nature  occupy  the  position  of  a power  with  which  we  are  not 
familiar.  Before  we  can  say  that  our  knowledge  of  any  one  law  is  complete 
we  must  see  that  it  holds  good  without  exception  and  make  this  the  test  of  its 
correctness. 

“ The  law  then  takes  the  form  of  an  objective  power  and  for  that  reason  we 
call  it  a force.  To  ascertain  laws  we  have  to  seek  out  forces  which  are  the  cause 
of  phenomena.” — Hemholtz. 


COPYRIGHT. 


WM.  w.  HAMPTON,  PRINTER, 

26  NORTH  PENNSYLVANIA  ST.,  INDIANAPOLIS. 


\ 


/ 

J 

S CONTENTS. 

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cJ  

^ CHAPTER  PAGE 

I.  The  Value  of  Money 5 

II.  The  Origin  of  Money 20 

III.  A Measure  of  Value 29 

(tl  IV.  The  Rate  of  Interest 42 

•X  V.  The  Circulation  of  Money . '. 61 

VI.  Interference  with  Circulation 63 

VII.  Correction  of  Circulation  76 


THE  CAUSE  AND  EFFECT  OF  MONEY. 


CHAPTER  I. 

THE  VALUE  OF  MONEY. 


In  the  ordinary  transactions  of  business  money  goes  from 
hand  to  hand  measuring  out  to  every  one  a share  of  the  social  en- 
ergy of  the  community. 

It  is  not  material  at  this  time  to  inquire  into  the  justness  of 
this  distribution,  but  it  is  important  to  understand  what  money  is 
doing  all  the  time,  and  what  is  being  measured. 

It  is  value  that  money  is  measuring  out,  and  it  is  value  that  is 
being  constantly  apportioned,  and  unless  we  understand  the  facts 
in  the  case,  we  will  fail  to  master  the  principles. 

There  are  no  facts  except  natural  daily  occurrences  of  sun  and 
rain,  wind  and  weather,  day  and  night,  that  are  more  familiar  than 
the  facts  about  money.  But  strange  as  it  may  appear  there  is 
scarcely  a subject  about  which  there  is  more  dispute  than  about 
the  functions  of  money. 

It  is  the  familiarity  of  money  that  has  held  hack  the  truth 
concerning  it,  because  the  most  familiar  and  necessary  truths  are 
latest  in  the  order  of  development. 

A writer  on  Economic  subjects  has  wisely  observed  that  the 
progress  made  in  unfolding  truth  has  been  in  proportion  to  its  re- 
moteness from  human  interests. 

We  have,  in  times  past,  chiefly  concerned  ourselves  with  the 
things  that  were  farthest  removed  from  our  immediate  welfare 
and  from  our  life  on  this  earth. 

Thousands  of  years  before  men  began  to  observe  the  familiar 
things  around  them  they  were  exhausting  their  intelligence  in 
fruitless  controversies  about  the  personal  attributes  of  God  and 
the  properties  of  the  human  soul. 

The  dawn  of  modern  science  was  the  awakening  of  men  to 


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truth  in  familiar  things  from  which  the  happiness  and  welfare  of 
the  great  mass  of  the  people  was  to  be  secured. 

But  the  gains  and  savings  and  increase  in  power  resulting 
from  the  application  of  science  are  almost  as  nothing  when  com- 
pared to  the  gains  we  may  expect  when  science  is  applied  to  our 
politics. 

One  laborer,  however  humble  his  occupation,  has  an  intelligence 
which  readily  adapts  itself  to  guide  modern  machinery  and  convert 
natural  forces  into  social  products.  And  the  power  of  these  nat- 
ural forces,  which  we  may  direct  by  our  common  labor,  is  beyond 
our  power  of  calculation. 

When  we  think  of  idle  and  misplaced  labor,  therefore,  we  are 
apt  to  overlook  the  fact  that  in  shutting  out  labor  we  cut  olf,  at 
the  same  time,  the  forces  which  science  calls  into  existence  and 
which  are  in  many  cases  at  least  two  hundred-fold  greater  than 
the  force  of  labor  alone. 

In  religion,  for  example,  the  waste  of  social  force  in  pulpits, 
churches  and  auxiliary  expenses  is  almost  incalculable  because  the 
work  of  the  church  is  behind  the  times  and  the  teaching  it  seeks 
to  inculcate  is  too  remote  from  human  happiness. 

A far  away  God  who  concerns  Himself  with  but  a few  of  the 
people,  who  are  so  fortunate  as  to  get  where  He  resides  after  they 
are  dead,  is  entirely  too  far  fetched  for  this  age  of  intelligence  and 
belongs  to  a time  when  the  well-being  of  the  common  people  gave 
the  rulers  of  men  no  concern. 

Thus  without  counting  economic  forces  there  are  vast  relig- 
ious forces  going  to  waste  that  should  be  exerting  their  power  to 
uplift  and  comfort  mankind. 

Millions  of  people  fail  to  find,  in  the  churches,  any  outlet  or 
support  for  the  higher  promptings  of  the  soul,  and  other  millions 
mistake  the  form  and  ceremony  of  the  church  for  the  divine  es- 
sence of  religion. 

Only  within  a few  years  has  the  religious  world  began  to  stir 
and  to  realize  that  is  was  connected  in  some  way  with  the  economic 
world,  and  that  God  is  nearer  to  us  than  we  are  in  the  habit  of  be- 
lieving and  somehow  our  daily  life  and  happiness  are  in  His  care. 

It  is  becoming  clearer  every  day  that  the  unfortunate  in  the 
world  are  the  result  of  our  own  ignorance  and  of  man’s  inhu- 
manity to  man,  and  the  church  can  no  longer  afford  to  abandon 


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them  to  an  antideluvian  Devil  and  withhold  from  them  the  sup- 
port and  fellowship  of  religion. 

The  whole  civilized  world  is  a money  getting  world,  to  he 
without  money  is  to  he  outside  the  world  and  beyond  the  pale  of  -- 
civilization,  and  to  possess  an  abundance  of  money  is  to  possess  all 
the  power  that  the  civilization  of  the  time  affords. 

If  you  were  to  select  the  greatest  good  in  the  world  and  were 
to  he  guided  in  that  selection  by  the  one  thing  above  all  others 
which  people  are  most  anxious  to  secure,  you  would  select  money 
at  once. 

And  your  belief  in  the  goodness  of  money  would  be  strength- 
ened as  you  beheld  the  struggle  on  one  side  to  get  plenty  of  it  and 
the  distress  and  suffering  on  the  other  side  caused  by  the  want 
of  it. 

But  we  do  not  seek  money  for  its  own  sake  but  for  the  power 
it  gives  by  having  other  people  furnish  us  with  the  results  of  social 
energy. 

We  want  money  because  we  want  power  and  the  value  of 
money  is  the  quantity  of  power  it  contains. 

The  value  of  money  is  therefore  a definite  quantity  of  social 
energy,  and  the  value  of  money,  differs  from  the  value  of  every- 
thing else,  as  wheat  or  coal,  because  such  value  is  free  to  be  ex- 
changed at  any  time  for  an  equal  value  of  anything  else,  while  the 
value  of  wheat  is  not  free  but  is  contained  in  the  wheat,  and  before 
we  may  exchange  wheat  for  anything  else  we  must  first  exchange  it 
for  the  free  value  of  money. 

Money-value  being  a force,  or  form  of  energy,  it  is  subject  to 
the  same  laws  that  control  other  forces  and  thus  money  has  limits 
beyond  which  its  power  stops  although  these  limits  are  much  wider 
and  more  diverse  than  any  other  single  force,  not  excepting  life 
itself. 

But  money  is  not  always  conceded  to  be  a blessing,  and  is  also 
known  as  the  root  of  all  evil,  because  we  find  the  nearer  we  ap- 
proach the  fullness  of  our  desire  for  money  the  farther  away  flies 
the  happiness  and  the  good  we  dreamed  we  might  buy  with  it. 

It  is  the  verdict  of  all  people  who  are  most  generously  wealthy 
that  it  is  a most  difficult  undertaking  to  give  away  money. 

It  is  the  opinion,  indeed,  of  the  men  who  make  charity  an  es- 
pecial study,  that  bounty  and  alms  giving  in  any  form  is  harmful. 


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It  is  certain  that  money  given  away  to  relieve  distress  can  ac- 
complish nothing  beyond  the  relief  of  the  persons  directly  con- 
cerned, and  its  secondary  effects  are  admitedly  bad  not  only  on  the 
giver  and  receiver  but  on  society  at  large. 

We  should  learn  from  this  that  another  Hand  from  ours  is 
playing  some  part  in  the  use  we  make  of  money  and  that  the  indi- 
vidual we  regard  as  all  important  is  scarcely  of  any  importance,  a 
step  only  in  the  ladder  of  progress. 

The  man  whom  nature  is  seeking  to  introduce  into  the  world 
and  to  bring  into  society  is  the  man  of  the  future,  the  man  of  per- 
fect happiness  and  of  complete  intelligence,  who  shall  be  an  image 
of  God. 

This  failure  of  charity  and  benevolence  to  restore  a certain 
degree  of  harmony  in  society  is  caused  by  a fierce  antagonism 
from  Nature  v/ho  refuses  to  have  her  own  plans  for  the  diffusion 
of  wealth  set  aside  in  favor  of  some  cheap  human  makeshift. 

Nature  refuses  to  allow  any  charitable  or  benevolent  compro- 
mise with  her,  plan  for  the  circulation  of  money,  and  if  we  desire 
to  secure  the  benefits  of  a just  and  equal  distribution  of  wealth 
we  must  learn  the  laws  of  its  natural  distribution  and  cease  to  in- 
terfere with  these  laws. 

This  becomes  clear  as  we  begin  to  realize  the  laws  of  value  by 
virtue  of  which  production  and  distribution  takes  place  and  by  vir- 
tue of  which  the  functions  of  money  are  regulated  and  controlled. 

What  we  should  see  now  quite  clearly  is  that  every  civilized 
man  is  required  to  first  get  money  before  he  is  permitted  to  sat- 
isfy his  desires,  and  we  ought  to  realize  that  nature  has  a purpose 
in  putting  the  value  of  money  between  a man  and  his  life  in 
society. 

Surely  it  is  not  for  nothing  that  all  over  the  civilized  world 
men  are  required  to  get  money  first  and  are  not  permitted  to  pro- 
duce and  exchange  directly. 

This  intervention  of  the  value  of  money  discloses  to  us  the 
plan  of  Nature  and  her  method  of  securing  the  co-operation  of 
men  in  carrying  out  that  plan. 

Granting  that  civilization  means  progress  and  progress  means 
development  toward  some  end  and  for  some  purpose,  then  we  must 
admit  that  Nature  is  required  to  invent  some  method  by  which  our 
labor,  and  other  activities,  shall  be  directed  in  the  way  we  shall 


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go  in  order  to  progress,  because  we  ourselves  never  know  of  what 
progress  consists. 

Thus  by  placing  the  value  of  money  between  men  and  the  sat- 
isfaction of  their  desires,  Nature  solves  her  own  problem  and  is 
able  to  compel  men  to  work  as  she  directs  by  holding  in  her  hands 
the  value  of  money  which  we  must  have  in  order  to  live. 

An  individual  who  desires  a dwelling  to  be  built,  according  to 
some  plan,  is  able  to  secure  the  required  labor  and  material  be- 
cause he  controls  'the  value,  in  the  form  of  money,  which  other 
people  require  who  build  his  house. 

So  Nature,  in  the  whole  world,  holds  value  in  her  hands  and 
rewards  the  worker  as  she  wishes  the  work  done  and  withholds 
value  where  she  would  discourage  development. 

In  order  to  control  and  direct  the  activities  of  men  it  is  a law 
of  Nature  that  they  must  secure  value  first  before  they  are  allowed 
to  think  about  themselves,  and  in  this  way  the  good  for  all  gets  in 
advance^  of  the  good  for  any. 

The  laws  of  value  determine  what  kind  of  activity,  and  how 
much  of  every  kind,  is  to  be  expended  in  any  direction  at  any  time, 
except  as  we  may  interfere  with  our  own  laws  by  making  some 
property  valuable  that  Nature  would  have  without  value. 

It  is  the  circulation  of  money  that  brings  these  laws  of  value 
before  our  eyes  and  enables  us  to  see  the  Hand  that  guides  us  and 
apportions  social  power  and  enjoyment. 

Getting  money  should  be  regarded  as  a means  to  some  end, 
although  that  end  may  be  so  far  removed  from  our  own  times  as 
to  be  lost  in  the  distance,  and  be  out  of  reach  of  our  intelligence. 

Having  much  money  may  be  compared  to  having  an  endless 
supply  of  meals  and  clothes  on  hand,  for  however  essential  a need- 
ful supply  may  be,  an  over  supply  can  only  become  a burden. 

The  range  of  action  for  money  is  limited  on  either  side.  Be- 
yond society  among  savages  money  is  not  required  and  a man  may 
live  a life  of  a low  social  order  with  little  or  no  money. 

But  passing  from  savage  into  civilized  life  we  find  the  neces- 
sity for  money  increasing  as  the  conveniences  of  civilization  mul- 
tiply, and  again  we  come  suddenly  to  the  upper  limit. 

After  money  supplies  us  with  the  advantages  of  a civilized 
life  its  functions  suddenly  cease  and  the  higher  life  of  thought  is 
beyond  its  control. 


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We  need  to  learn  that  the  primary  purpose  of  money  is  not 
for  the  selfish  satisfaction  of  our  own  appetites  hut  it  has  an  office 
of  its  own  in  the  body  politic  and  the  satisfaction  we  get  from 
money  must  ever  be  secondary  to  its  higher  uses. 

If  we  desire  to  secure  for  ourselves  our  proper  share  in  the 
circulation  of  money  we  are  required  by  I^ature  to  understand 
this  greater  purpose  of  money,  and  only  when  we  adjust  our  hu- 
man laws  to  the  natural  laws  of  value  may  we  expect  the  money 
we  each  receive  to  be  a measure  of  the  part  we  each  perform  in  the 
greater  work  of  civilization. 

The  fond  parent  looks  to  a profession,  or  a trade,  for  his  child 
to  enable  it  to  fill  a position  in  society  and  to  earn  the  money  re- 
quired. 

There  is  something  in  the  way,  however,  which  seriously  in- 
terferes with  all  such  plans — professions  seem  to  be  over-crowded, 
and  wages  are  much  too  low  to  sustain  a decent  social  position  in 
most  of  the  trades. 

The  economic  condition  of  society  as  a whole  is  now  confront- 
ing the  parent  and  reacting  on  him  when  he  seeks  to  provide  a 
place  for  his  children,  and  this  social  condition  has  to  do  with  that 
greater  use  of  money  which  should  always  have  precedence  over 
individual  rights  in  property. 

It  is  not  too  much  to  say  that  a law  of  God  commands  us  to 
understand  the  money  question  and  it  is  a crime  to  educate  chil- 
dren to  seek  only  money  and  applaud  men  whose  life  is  a struggle 
for  money  for  themselves  alone. 

It  is  the  height  of  folly  to  allow  the  specter  of  vested  rights 
to  blind  our  eyes  to  the  individual  greed  that  would  hold  the  mass 
of  mankind  in  slavish  subjection. 

We  have  been  weaving  a net  of  private  property  that  is  now 
fast  entangling  our  feet  and  preventing  all  social  progress. 

It  is  well  to  bear  in  mind  that  no  question  is  ever  settled  until 
it  is  settled  right,  and  also  to  remember  that  the  question  of  right, 
in  social  affairs,  is  not  a question  of  belief  but  a scientific  question 
of  fact. 

Whatever  opinion  the  reader  may  hold  he  must  remember 
that  it  is  not  enough  to  believe  that  he  is  right,  but  it  is  necessary 
to  know  that  he  is  right,  and  from  a standpoint  of  science  he  may 
know  this  as  certainly  as  any  mathematical  proposition  may  be 
known. 


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In  the  money  question  we  are  dealing  with  effect  and  cause, 
and  the  cause  becomes  a force  for  the  reason  that  it  is  invariably 
followed  by  its  effects  and  gives  us  a basis  of  science. 

The  cause  of  money  is  the  value  of  it,  and  this  value  obeys  cer- 
tain laws  which  money  follows  as  a needle  follows  its  magnet. 

. Money  carries  value  among  the  members  of  society  and  this 
value  is  being  maintained  or  generated  every  day  by  the  activity  of 
every  contributing  force  in  society,  and  the  circulation  of  money 
is  determined  by  laws  which  regulate  and  control  the  flow  and  cir- 
culation of  this  value. 

The  utmost  we  may  ever  accomplish  by  our  laws  is  to  stop 
all  interference  with  the  circulation  and  generation  of  value  or 
with  the  activities  upon  which  the  supply  of  value  depends. 

The  claim  made  for  this  work,  in  comparison  with  thous- 
ands of  other  writings  on  the  same  subject,  arises  wholly  from  the 
new  idea  and  treatment  of  value  in  its  relation  to  money. 

The  difference  between  the  prevailing  theories  and  the  new 
standpoint  is  well  illustrated  as  follows: 

W.  Stanley  J evons  in  his  work,  ‘^^Money  and  the  Mechanims  of 
Exchange,^^  says  Value  expresses  ratio  in  exchange,^^  whatever 
that  may  be  supposed  to  mean.  Continuing  he  says — 

^^We  must  now  direct  our  attention  upon  the  fact  that  in 
every  act  of  exchange  a definite  quantity  of  one  substance  is  ex- 
changed for  a definite  quantity  of  another.’^ 

^^The  things  bartered  may  be  the  most  various  in  character 
and  may  be  variously  measured.^^ 

^^The  quantities  to  be  measured  may  be  expressed  in  terms 
of  space,  time,  mass,  force,  energy,  heat  or  any  other  physical 
units.^^ 

“Yet  each  exchange  will  consist  in  giving  so  many  units  of 
one  thing  for  so  many  units  of  another,  each  measured  in  its  ap- 
propriate way.^^ 

“Every  act  of  exchange  thus  presents  itself  to  us  in  the  form 
of  a ratio  between  numbers.  The  word  value  is  commonly  used 
“For  our  purpose  at  least  the  use  of  the  word  value  is  only  an  indi- 
rect method  of  expressing  a ratio  of  numbers.^^ 

The  entire  failure  of  the  prevailing  theories  of  money  is  ex- 
pressed in  the  above  quotation  which  will  be  made  plain  upon 
slight  examination. 


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Mr.  Jevons  uses  the  illustration  that  if  copper  exchanges 
weight  for  weight  for  ten  times  as  much  iron  then  the  value  of 
copper  is  ten  times  the  value  of  iron. 

Now  plainly  this  is  getting  the  cart  before  the  horse  because 
the  word  ‘‘if’  is  at  the  wrong  place.  If  the  value  of  copper  is  ten 
times  the  value  of  iron  then  it  will  take  ten  times  as  much  iron  in 
weight  to  equal  the  value  of  a given  weight  of  copper. 

In  plain  words  we  never,  as  a matter  of  fact,  obtain  the  value 
of  anything  by  obtaining  a ratio  of  numbers  first,  but  having  the 
value  of  any  number  of  articles  the  ratio,  or  relation  between 
them,  is  simple  and  obvious. 

Having  the  value  of  iron  and  of  copper  the  relation  of  weight 
to  value  solves  itself  and  is  simple,  and  ratio  of  numbers  is  the 
effect  of  value  and  is  not  the  cause,  as  Mr.  Jevons  attempts  to  ex- 
plain. 

In  the  same  work  Mr.  Jevons  uses  an  illustration  which 
effectively  dissipates  the  idea  that  value  is  a ratio  of  numbers. 

In  speaking  of  the  difficulties  of  barter  which  is  the  difficulty 
of  establishing  a ratio  of  numbers  he  says:  “In  a state  of  barter 
the  price  current  list  would  he  a complicated  document  for  each 
commodity  would  have  to  be  quoted  in  terms  of  every  other  com- 
modity. Between  100  articles  there  must  exist  4950  possible 
ratios  of  exchange  and  these  ratios  must  be  carefully  adjusted  so 
as  to  be  consistent  with  each  other.” 

‘^^All  such  trouble  is  avoided  if  one  commodity  is  chosen  and 
its  ratio  of  exchange  with  each  other  commodity  be  quoted.” 

Here  is  a manifest  contradiction  because  barter  is  not  abol- 
ished by  choosing  one  commodity  as  a measure — what  is  done  to 
abolish  complicated  ratios  is  the  development  of  one  commodity 
as  a money. 

It  is  self-evident,  in  the  ease  of  the  100  articles  referred  to, 
that  if  value  could  be  eliminated  each  commodity  would  have 
4950  prices. 

However  the  absurdity  of  this  number  theory  of  exchange 
will  become  plain  when  we  study  the  principles  of  measurement 
for  a moment. 

What  is  it  that  actually  happens  in  every  exchange  in  con- 
trast to  what  Mr.  Jevons  assumes  to  take  place.  A commodity 
to  be  exchanged  in  his  list  of  100  must  first  be  exchanged  for  its 


13 


value  in  money  and  then  this  value  can  be  exchanged  for  its  equal 
value  in  anything  else. 

This  is  the  actual  fact  and  what  does  this  fact  signify  ? Therc^ 
can  he  but  one  conclusion,  namely,  that  everything  exchanged  has 
a common  origin,  which  may  he  expressed  in  terms  of  value. 

Let  us  now  return  to  where  Prof.  Jevons  says,  ^^The  quantity 
to  he  measured  may  he  expressed  in  terms  of  space,  time,  mass, 
force,  energy,  heat  or  any  other  physical  unit.” 

One  thing  is  now  a scientific  certainty,  namely,  that  exchange 
between  such  various  dissimilar  factors  can  never  he  accomplished 
except  each  factor  can  be  reduced  to  some  term  which  is  common 
to  them  all. 

What  factor  is  it  that  is  common  to  everything  that  is  ex- 
changed anywhere  in  the  civilized  world? 

Manifestly  it  is  value,  hut  value,  you  may  say,  fails  to  convey 
any  idea  to  the  mind. 

But  this  is  only  true  of  value  in  the  abstract  as  it  is  true  of 
any  force  in  the  abstract,  hut  in  relation  to  the  things  exchanged, 
value  conveys  a definite  idea  of  social  force. 

Manifestly  everything  exchanged  in  society  can  be  reduced 
to  common  terms  of  social  energy. 

The  total  activity  of  any  community  for  any  given  time  re- 
sults in  a definite  number  of  products  which  have  consumed  the 
energy. 

Therefore  any  product  must  be  reduced  to  terms  of  this  social 
energy  before  it  can  be  compared  and  exchanged. 

But  you  may  exclaim  that  this  is  not  one  force  but  is  such  a 
complication  of  forces  that  the  difficulty  increases  instead  of  di- 
minishes. 

Not  so,  however,  because  Nature  comes  to  our  relief  and  re- 
solves all  these  forces  into  a single  force,  which  equals  them  in 
their  social  energy,  and  we  have  given  this  force  the  name  of 
value. 

The  value  of  property  of  every  description  in  any  community 
is  always  equal  to  the  social  energy  of  all  the  forces  engaged  ir 
that  community.  This  value  rises  as  social  energy  rises  or  falls 
with  the  decline  of  social  energy,  and  each  product,  or  form  of 
property,  has  consumed  a part  of  this  total  social  energy  which 
its  own  value  should  express. 


14 


Hence  we  get  a ratio  which  is  in  fact  a ratio  and  not  a mere 
collection  of  words. 

The  value  of  anything  is  the  value  of  a part  in  ratio  to  the 
whole  and  this  is  what  a ratio  must  express — a part  to  the  whole. 

The  value  of  any  commodity  expresses  that  part  of  the  total 
social  energy  engaged  or  contained  in  the  commodity,  and  the 
commodity  expresses  its  own  part  of  the  total  product. 

This  is  so  evidently  the  true  explanation  of  exchange  that  ex- 
tended comment  must  become  a mere  superfluity  of  phrases. 

Bearing  in  mind  that  value  is  cause  and  money  a peculiar 
effect  of  that  cause,  it  will  be  clear  that  a knowledge  of  the  func- 
tions of  money  must  be  based  upon  a knowledge  of  the  circulation 
of  value. 

The  persistence  of  the  need  for  money  has  given  rise  to  two 
theories  of  its  functions  that  are  the  opposite  of  each  other — one 
theory  holding  that  the  amount  of  money  in  circulation  is  every- 
thing and  seeks  to  increase  the  quantity  of  money,  while  the  other 
theory  contends  that  money  is  non-essential  and  would  abolish 
its  use  altogether. 

The  writers  who  would  increase  the  amount  of  money  in  cir- 
culation see  one  truth  clearly,  namely,  that  money  has  become 
vitally  essential  to  the  activity  and  welfare  of  society. 

In  arguing  therefore,  that  the  activity  of  society  depends 
upon  the  circulation  of  money  they  are  right  or  wrong,  depending 
on  whether  they  mean  that  we  depend  on  money  in  getting  our 
share  of  the  value  which  money  is  the  means  of  distributing,  o 
whether  they  mean  that  money  itself  is  the  cause  of  this  circula- 
tion of  value  instead  of  being  but  the  effect  of  it. 

What  they  fail  to  see  is  that  this  great  body  politic  acts  like 
an  immense  machine  which  is  generating  value  all  the  time  out  of 
the  working  forces  of  society,  and  the  continuance  of  activity  in 
society  requires  that  this  value  shall  be  continuously  and  equita- 
bly distributed,  and  money  only  acts  as  a conductor  which  is 
charged  with  value. 

This  generation  of  value  by  the  combination  of  forces  may  be 
fitly  compared  to  a constant  supply  of  electric  force  at  a central 
station  which  is  being  carried  out  as  fast  as  it  is  generated  along 
paths  and  conductors  so  designed  as  to  carry  the  proper  supply  to 
each  part,  and  these  conductors,  dividing  and  becoming  smaller 


IS 


as  they  spread  oat  are  designed  to  deliver  valae  in  such  quanti- 
ties as  will  secure  the  work  of  every  kind  which  society  wishes  to 
have  done. 

In  this  illustration  money  would  take  the  place  of  copper 
which  carries  the  electric  current,  money  being  charged  with  value, 
as  a copper  conductor  is  charged  with  electricity,  and  money  deliv- 
ers up  value  instantly  at  every  exchange  and  takes  up  a new  sup- 
ply of  value  at  once  to  deliver  at  the  next  exchange. 

It  would  be  as  foolish  to  charge  some  fault  in  the  generating 
machinery  to  the  copper  conductors  as  it  is  to  charge  some  failure 
in  our  central  society  to  a scarcity  of  money. 

Just  as  a copper  wire  is  a better  conductor  of  electricity  than 
iron  by  about  6%  to  1,  so  also,  is  some  money  a better  conductor 
of  value  than  other  money,  but  there  is  no  doubt  that  the  money 
of  the  world  is  able  to  conduct  all  the  value  with  which  it  is  sup- 
plied vdthout  much  loss,  and  the  fault  is  not  in  money  but  in  some 
interference  with  value. 

It  is  on  account  of  a failure  to  distinguish  cause  from  effect—- 
to  distinguish  value  from  the  medium  conducting  value,  that  has 
led  the  world  into  so  many  disastrous  experiments  in  financial  leg- 
islation. 

It  is  comparatively  easy  in  these  days  of  paper  money  for  an 
nation  to  increase  the  quantity  of  its  money,  but  to  keep  it  of 
the  same  value  is  another  matter,  and  the  statesman  has  never 
appeared  who  could  coin  money  at  will  and  maintain  its  value. 

The  reason  we  can  not  both  issue  and  regulate  the  value  of 
money,  is  because  Nature  herself  determines  how  much  value  she 
will  permit  any  given  quantity  of  money  to  have,  and  we  might 
legislate  forever,  on  this  matter,  without  changing  the  value 
Nature  allows  money  to  have. 

The  amount  of  value,  in  any  given  community,  that  may  at- 
tach to  money  is  always  a certain  ratio  of  the  whole  value. 

This  is  to  say  that  in  the  City  of  New  York,  for  example,  if 
the  total  value  of  all  property  is  equal  to  three  thousand  million 
dollars  then  the  value  of  the  money  in  circulation  will  be  a cer- 
tain per  cent,  of  it,  say,  for  instance,  twenty  per  cent.,  or  six  hun- 
dred million  dollars  of  actual  money. 

If  the  supply  of  money  comes  faster  than  other  values  then 
profits  fall  and  drives  money  away,  or  if  the  reverse  be  true  then 
profits  rise  to  attract  more  money. 


16 


In  addition  to  this  flow  in  volume  of  money  there  is  a more 
rapid  adjustment  from  changes  in  the  speed  of  circulation. 

As  changes  in  business  activity  call  for  greater  or  less 
amounts  of  money  in  short  periods  of  time  the  want  is  met  by  a 
rise  or  fall  in  the  speed  of  circulation. 

This  fixity  in  the  value  of  money  has  always  prevented  inter- 
ference by  legislation  and  has  brought  all  schemes  of  government 
finance  to  grief. 

If  we  will  take  the  United  States  as  our  example  we  may  eas- 
ily illustrate  how  this  stability  in  the  value  of  money  makes  itself 
felt. 

Suppose  we  call  the  value  of  all  property  in  the  United  States 
equal  to  eighty  billion  dollars  and  the  value  of  the  money  that 
will  circulate  as  twenty  per  cent,  of  this  amount,  or  sixteen  hun- 
dred million  dollars. 

Let  us  suppose  that  this  amount  gives  us  a per  capita  circu- 
lation of  twenty  dollars  and  it  is  proposed  to  increase  this  to  forty 
dollars,  and  instead  of  sixteen  hundred  millions  to  have  thirty- 
two  hundred  million  dollars  worth  of  money. 

In  this  event,  if  Nature  did  not  interfere,  the  relation  of  the 
value  of  money  to  other  values  would  be  changed  from  twenty 
per  cent,  of  the  total  to  forty  per  cent.,  and  the  value  of  money 
would  be  doubled. 

It  is  well  to  remark  here  that  when  the  advocates  of  much 
money  talk  about  its  value  they  refer  to  the  unit  of  value,  the 
dollar,  but  we  are  discussing  the  value  of  money  as  a whole. 

The  effect  of  thus  doubling  the  volume  of  money  would  be  to 
cause  a rapid  rise  in  prices  of  all  kinds  until  the  true  relation  be- 
tween the  value  of  money  and  all  other  values  was  restored  to 
twenty  per  cent. 

Let  us  suppose,  however,  that  some  scheme  is  devised  whereby 
this  rise  in  prices  is  prevented  and  the  value  of  money  is  doubled. 

In  this  event  you  would  find  that  Nature  had  another  plan  to 
defeat  ours,  and  the  whole  speed  of  circulation  would  fall  so  low  as 
to  require  twice  the  quantity  of  money  to  do  the  work  that  was 
done  before. 

The  reason  for  this  will  become  clear  as  we  see  that  money 
measures  out  value  to  the  people,  and  distributes  wealth  among 
them,  and  it  is  not  the  quantity  of  money  that  is  of  so  much  con- 
cern as  it  is  the  quantity  of  value  that  is  free  to  be  distributed. 


17 


A yard  stick,  given  time  enough,  may  measure  an  indefinite 
number  of  yards  of  cloth  by  being  used  over  and  over  again,  so 
money  measures  value  by  being  used  over  and  over  again,  and  just 
as  a yard  stick  goes  out  of  business  when  the  cloth  has  all  been 
measured,  so  money  is  forced  out  of  business  when  value  is 
taken  out  of  circulation  to  make  a few  rich  instead  of  being  dis- 
tributed among  the  many. 

If  we  had  the  value  in  circulation  with  which  to  endow  all 
the  goods  we  could  produce  we  would  have  a market  that  was  prac- 
tically without  a limit. 

Value,  as  you  must  see  it  then,  is  a force  furnished  by  Nature 
through  the  activities  of  society,  and  it  is  the  chief  function 
of  money  to  measure  out  and  distribute  this  force  among  the  mem- 
bers of  society  so  as  to  keep  up  social  activities. 

The  business,  or  activity,  of  any  civilized  country  always  de- 
pends upon  the  amounts  of  value  received  by  its  members  and  the 
use  they  make  of  that  value. 

Among  the  great  mass  of  workers  in  the  United  States  it  is 
very  likely  that  the  average  for  men,  women  and  children  will  not 
exceed  one  dollar  per  day  for  every  day  in  the  year. 

If  then  we  were  to  write  up  the  activity  of  the  United  States 
in  dollars  we  would  say  that  if  twenty-five  million  people  received 
and  spent  on  the  average  of  one  dollar  each  per  day,  that  this  sum 
of  twenty-five  million  dollars  per  day  was  the  limit  of  our  business 
power. 

If  wages  were  to  fall  to  a standard  as  low  as  in  China,  then 
the  activity  would  fall  in  the  same  way  or  rather  in  an  increasing- 
ratio,  while  if  the  sums  distributed  as  wages  were  to  double,  then 
the  business  activity  would  more  than  double. 

When  this  circulation  of  value  among  the  members  of  society 
is  interfered  with  money  may  be  never  so  plenty  but  it  can  find 
nothing  to  do,  and  the  unthinking  say  that  a lack  of  confidence 
has  driven  money  out  of  business  or  else  there  is  not  money 
enough  in  the  country. 

It  is  a matter  of  fact,  very  easy  to  discover,  that  this  obstruc- 
tion to  the  flow  of  value  is  outside  of  any  system  of  finance  and 
no  change  in  quantity  or  quality  of  money  can  put  the  value  into 
circulation  that  is  now  held  back  and  absorbed  by  property  of  some 
kind. 


18 


The  theory  that  would  abolish  money  entirely  and  substi- 
tute some  form  of  direct  exchange  of  goods,  or  of  labor  checks, 
whereby  hours  of  labor  would  become  a measure  of  exchange  in- 
stead of  the  value  of  money  is  based  upon  many  false  conceptions. 

The  advocates  of  this  theory  gather  their  inspiration  from 
the  observation  that  money  is  not  usually  desired  for  itself,  but 
that  we  are  somehow  required  to  get  money  first  before  we  may 
really  get  the  things  we  want. 

Believing  that  money  is  purely  a human  invention,  and  a 
creature  of  law,  and  it  has  passed  into  the  control  of  a few  great 
hanking  houses  they  would  cut  the  Gordian  Knot  by  abolishing 
money  altogether. 

Here  we  encounter  the  old  difficulty  which  is  found  in  every 
economic  discussion,  namely,  that  value  is  set  aside  and  disre- 
garded. 

These  theorists  never  inquire  if  by  doing  away  with  money 
they  do  away  with  value  and  if  so  what  other  results  might  follow. 

As  we  begin  to  appreciate  the  work  of  Nature,  in  the  devel- 
opment of  mone}^  and  see  how  perfect  is  this  measure  of  social  en- 
ergy, and  how  well  it  is  adapted  to  the  ends  in  view,  we  will  turn 
from  seeking  to  lift  up  society  by  changes  in  its  money  system  to 
the  true  cause,  and  then  we  will  have  some  hope  of  doing  some- 
thing permanent  for  the  benefit  of  the  struggling,  over-worked 
masses. 

It  must  not  be  presumed  that  men  in  society  are  only  a col- 
lection of  semi-savages  who  are  free  to  seek  the  gratification  of 
their  appetites  without  restraint  from  natural  law  or  without  any 
plan  to  fulfill. 

The  desires  with  which  we  find  ourselves  possessed  are  the  de- 
sires it  was  planned  we  must  possess,  and  only  such  part  of  the 
race  of  savage  mankind  was  able  to  advance  as  acquired  the  new 
desires  that  led  them  upward  and  forward.  ' 

The  leading  people  of  the  civilized  world  to-day  are  the  ones 
who  have  most  closely  observed  the  natural  order  and  acquired 
appetites  needed  to  carry  out  the  plan  Nature  has  in  view  by  the 
evolution  of  society. 

Look,  for  a moment,  at  the  road  the  human  race  has  traveled 
over  and  left  behind  it  in  its  journey  toward  civilization. 

Men  started  as  naked  savages  with  brutal  and  savage  instincts. 


19 


without  the  power  to  work^  or  speak,  or  think,  and  they  have  come 
into  the  posession  of  an  intelligence  and  power  that  is  only  com- 
parable to  the  intelligence  and  power  of  God. 

In  thus  looking  back  over  this  path  of  the  human  race,  in 
their  hard  struggle  upward,  we  are  compelled  to  ask  ourselves  what 
Divine  Hand  has  been  guiding  us  to  show  us  the  way  while  other 
people  have  remained  as  animals. 

In  the  progress  of  the  races  of  man  came  a time  when  they 
awoke  to  the  consciousness  of  this  Power  that  was  guiding  and  di- 
recting them,  and  at  such  time  Eeligion  and  the  worshiping  of 
God  sprang  forth  with  wonderful  vitalitj^ 

The  religious  wars  of  the  world  seem  quite  natural  when  we 
think  what  a new  consciousness  of  this  kind  must  have  meant  to 
a passionate,  primitive  people. 

It  must  have  appeared  to  each  race  that  to  fight  for  their  re- 
ligion and  their  God  was  to  fight  to  maintain  a supremacy  higher 
than  the  race  itself.  Nor  can  we  wonder  that  in  this  conflict  of 
religions  the  Christian  Eeligion  survived  and  became  the  religion 
of  the  dominant  races  because  its  God  was  for  love  and  peace,  and 
an  equal  God  for  all  mankind. 

A new  and  higher  faith  in  God  must  appear  as  the  truths  of 
science  make  it  plain  that  our  destiny  is  under  Divine  guidance, 
and  as  we  appreciate  the  bountiful  provision  that  is  made  upon 
this  earth  for  the  happiness  of  every  one,  which  our  ignorance 
alone  prevents  us  from  enjoying. 


CHAPTER  11. 


THE  ORIGIN  OF  MONEY. 

It  would  be  a serious  mistake  at  the  outset  to  believe  that 
money  has  its  origin  in  the  human  laws  which  regulate  the  coinage 
and  value  of  the  money  units. 

Long  before  the  dawn  of  written  history  the  making  of  money 
was  in  active  progress  in  the  workshop  of  Nature,  and  the  pro- 
cess consumed  a long  period  in  the  history  of  social  development, 
and  it  is  not  yet  complete. 

Legislation  has  no  more  power  to  create  the  money  of  a coun- 
try than  it  has  to  create  its  language,  all  the  law  can  do  is  to  rec- 
ognize the  money  already  developed  and  sustain  its  uniform  value 
by  appropriate  coinage  laws. 

Money  is  the  language  of  the  body  politic  and  does  its  talking 
and  counting,  it  keeps  telling  us  what  to  do,  the  easiest  way  to  do 
it,  and  informs  us  what  it  is  worth  on  being  done. 

In  considering  the  origin  of  money  we  will  fail  unless  we  are 
willing  to  recognize  a Creative  Intelligent  Purpose  in  its  develop- 
ment. 

In  trying  to  solve  any  mystery  of  creation  wherein  manifest 
intelligence  is  displayed  it  is  required  of  us  that  we  discover  the 
purpose  of  that  creation,  otherwise  we  will  surely  fail  in  our  under- 
standing, however  successfully  we  may  classify,  investigate  and 
catalogue  a great  collection  of  facts. 

In  the  prevailing  theories  of  evolution  there  is  an  evident 
failure  to  master  the  problems  of  the  higher  forms  of  develop- 
ment, and  in  unfolding  the  laws  regulating  life  and  society. 

Development  is  looked  upon  as  almost  a purely  mechanical 
process,  and  changes  are  explained  upon  a basis  of  mechanical 
action  alone,  obeying  laws  of  mechanics  and  laws  of  motion  that 
seem  to  be  unrelated  to  any  purpose,  or  connected  to  any  end  to 
be  achieved. 

It  was  on  account  of  the  early  investigation  of  physical  phe- 
nomena that  we  accepted  this  tendency  to  mechanical  methods  in 


21 


the  science  of  evolution,  because  such  methods  seemed  quite  sat- 
isfactory for  purely  physical  and,  therefore,  mechanical  changes. 

But  in  following  truth  the  scientist  must  continually  go  for- 
ward and  upward,  as  the  world  came  forward  hy  development,  and 
he  comes  to  a time,  in  his  search  for  truth,  when  life  and  society 
furnish  problems  for  which  physical  and  mechanical  explanations 
prove  an  utter  failure. 

Unless  scientists  are  willing  to  recognize  a purpose  in  life, 
and  a plan  in  civilization,  they  must  fail  to  master  its  problems, 
or  explain  its  mysteries,  because  here  we  find  means  are  every- 
where adapted  to  ends. 

A time  came  to  the  progressive  races  of  men  when  their  ex- 
perience with  the  world  brought  them  in  contact  with  a creative 
power,  and  compelled  them  to  recognize  God  according  to  the  de- 
gree of  their  intelligence. 

So  must  there  come  a time  to  scientists,  in  the  investigation 
of  this  same  world  and  in  seeking  an  explanation  of  its  mysteries, 
when  they  must  recognize  God  according  to  the  degree  of  their 
intelligence,  and  become  conscious  of  a purpose  in  the  progress  of 
mankind. 

With  this  idea  of  Intelligent  Creative  Purpose  in  mind  the 
explanation  of  the  origin  and  development  of  money  loses  most 
of  its  difficulties. 

There  are  two  fundamental  ideas  upon  which  the  develop- 
ment of  money  is  based — the  first  idea  deals  with  the  purpose  of 
ISTature  in  the  creation  of  money,  and  the  other  idea  deals  with 
the  rise  of  human  intelligence  by  which  a consciousness  of  money 
is  born,  so  that  the  human  being  may  become  the  instrument  in 
carrying  out  this  purpose. 

The  first  proposition  we  need  to  consider  deals  with  the  pur- 
pose money  serves  in  carrying  out  the  plan  of  civilization. 

The  facts  in  the  commercial  and  industrial  world  make  it 
perfectly  clear  that  the  use  of  money  has  accomplished  a separa- 
tion between  the  civilized  man  and  the  means  of  life. 

A civilized  man  is  required  to  get  money  before  he  may  sat- 
isfy any  but  the  most  simple  and  primitive  desires.  He  produces 
the  things  he  does  not  want  and  is  compelled  to  exchange  them 
for  their  value  in  money  in  order  to  get  the  things  he  wants. 

The  savage  was  a law  unto  himself,  he  secured  his  own  food. 


22 


supplied  his  own  simple  wants,  and  was  quite  independent  of  other 
savages. 

By  the  use  of  money  Nature  holds  the  life  and  activity  of 
men  in  her  hands  because  she  holds  value  in  her  hands,  and  in  tak- 
ing value  from  one  place  activity  stops  at  that  place,  and  bestowing 
value  at  another  place  activity  follows  there. 

Just  as  we  would  consider  a workman  setting  about  to  do  his 
work,  and  taking  account  of  his  forces  and  materials,  so  also  must 
we  consider  Nature  in  the  work  of  developing  money. 

For  are  we  not  all  but  apprentices  of  the  Master  Workman, 
and  are  not  our  small  plans  and  works  but  a miniature  of  the 
greater  plan  and  the  greater  work? 

And  have  not  we  all  learned  our  trade  in  the  workshop  of  the 
world,  and  have  not  we  become  the  people  we  are  because  we  were 
compelled  to  work  so  as  to  secure  value  before  we  could  satisfy  our 
desires? 

Eemember  that  the  industrial  organization  of  society,  with 
railroads,  steam  and  electric  power,  came  into  existance  without 
the  devising  of  human  beings;  but  developed  because  we  were  com- 
pelled to  pursue  value,  and  then  you  will  begin  to  realize  the  ma- 
jestic proportions  of  this  plan  of  civilization,  which  is  being 
worked  out  under  our  own  eyes  according  to  laws  of  value. 

In  this  great  work  of  making  money  Nature  had  two  great 
tasks  to  perform. 

One  great  task  was  to  so  combine  all  the  forces  of  men  and  an- 
imals, and  all  the  natural  forces  into  a new  force  that  could  con- 
tain them  and  hold  them  together,  this  was  to  develop  value. 

The  second  great  task  dealt  with  the  material  at  hand  to 
wield  these  forces,  with  Nature^s  apprentices,  her  secondary  work- 
men, with  the  wild,  brutal  and  unthinking  savages. 

As  Nature  was  developing  value  so  as  to  combine  natural 
forces  into  social  forces  it  was  necessary  to  develop  a consciousness 
of  this  value  in  the  human  mind. 

In  seeking  the  origin  of  money,  therefore,  we  go  back  to  the 
origin  of  value,  to  the  beginning  of  society  where  we  find  only  sav- 
ages who  could  not  talk,  nor  work,  nor  think. 

These  savages  had  a fetv,.  animal  appetites  or  desires  which 
were  the  basis  of  development  in  them,  and  as  these  desires 
changed  from  lower  to  higher  levels  the  savage  changed  to  higher 
levels. 


23 


In  order  to  change  idle,  ignorant  and  brutal  savages  into  the 
constructors,  planners,  and  builders  of  society  it  was  necessary 
that  their  appetites  he  worked  upon,  and  that  they  should  discover 
they  could  satisfy  their  savage  greed  easier  by  following  Nature’s 
plan  than  by  pursuing  a plan  of  their  own. 

Again  it  was  necessary  that  new  appetites  in  considerable 
number  make  their  appearance  so  that  the  new  desires  of  men 
would  increase  Nature’s  hold  on  them,  and  urge  them  to  work  all 
the  harder  in  order  to  satisfy  more  appetites. 

By  increasing  our  desires,  and  our  appetites.  Nature  increased 
our  hunger,  and  our  incentive  to  work  her  way. 

At  first,  of  course,  all  the  savages  were  outside  of  this  social 
plan  and  it  was  necessary  to  urge,  and  coax,  and  force  them  in, 
a little  at  a time.  Nature  began  with  the  formation  of  a tribe, 
which  gradually  increased  to  a nation. 

In  the  beginning  the  savages  were  united  by  the  strength  of 
numbers  alone,  but  they  soon  developed  other  advantages  and  be- 
gan constructing  an  environment  which  gradually  withdrew  them 
from  savage  pursuits  and  hemmed  them  into  a social  body. 

With  the  growth  of  society  came  an  environment  that  spread 
over  the  earth  like  a drag  net  seeking  out  savages  and  forcing  civ- 
ilization upon  them,  bringing  men  into  closer  and  closer  relation- 
ship, and  compelling  them  to  work  more  and  more  fully  for  the 
benefit  of  others  while  they  were  working  to  benefit  themselves. 

The  first  advance  in  the  development  of  value,  and  conse- 
quently in  the  development  of  money,  was  made  when  separate 
and  isolated  savages  united  to  form  a tribe. 

The  power  of  the  individuals  who  were  thus  united  by  a tribe 
was  greater  than  the  power  of  the  same  number  of  individuals 
who  remained  outside.  And  this  difference  in  power  was  the  first 
social  gain  in  power,  and  was  therefore  the  beginning  of  a new 
force  brought  into  existance  by  this  union  of  numbers. 

The  tribe  was  held  together  by  this  advantage  of  increased 
power  because  it  made  each  member  more  forceful,  and  enabled 
him  to  live  safer  and  easier  than  before. 

The  tribal  force  was  at  first  the  joint  product  of  mere  num- 
bers in  which  each  unit  contributes  as  much  as  another,  and  in 
which  each  enjoyed  his  part  of  the  joint  gain  in  power. 

In  this  first  appearance  the  social  energy  was  completely 


24 


homogeneous^  one  part  can  not  be  distinguished  from  another,  and 
it  was  the  joint  property  of  the  tribe,  and  it  made  for  the  import- 
ance or  sovereignty  of  the  tribe,  and  no  single  individual  could  ac- 
quire any  part  of  it  as  his  own. 

This  beginning  of  social  energy,  although  weak,  contains 
vast  possibilities  for  development,  for  now  the  tribal  consciousness 
is  born,  and  the  savage  becomes  conscious  of  his  tribe,  and  ethics, 
and  government  and  order  have  a beginning. 

In  the  tribe,  for  the  first  time,  the  savage  becomes  conscious 
of  others,  and  for  the  first  time  he  must  have  some  care  about  his 
conduct,  and  consider  whether  the  tribe  will  approve  or  condemn 
his  acts. 

In  this  faint,  first  beginning  of  society  the  units  composing  it 
may  be  said  to  be  all  like  one  another,  without  a trace  of  charac- 
ter, or  any  personal  distinction  above  the  animal. 

But  at  once  this  social  energy,  this  cause  of  development,  be- 
gins to  assert  itself,  the  tribe  begins  slowly  to  advance,  gaining 
speed  with  each  increase  in  social  power. 

New  forces  begin  immediately  to  change  the  savage  nature, 
and  some  begin  an  independent  advancement  backed  by  the  cor- 
rellated  power  of  their  tribe. 

Some  of  the  members  of  a tribe  soon  develop  capacities  higher 
than  mere  membership  and  in  this  they  secured  benefits  to  them- 
selves besides  gaining  the  approval  of  the  tribe,  because  such  indi- 
vidual advancement  would  react  to  increase  the  power  of  the 
tribe. 

As  soon  as  individual  capacity,  and  primitive  character,  be- 
gan to  form,  the  lines  of  ascent  began  to  mark  out  their  paths,  and 
the  gain  in  social  power  from  the  individual  back  to  the  tribe,  and 
the  return  of  power  from  the  tribe  back  to  the  individual,  w^as 
never  ending. 

There  was  a two-fold  development  continually  at  work  evolving 
the  state  on  one  hand,  and  developing  the  capacity  of  the  individ- 
ual on  the  other  hand. 

There  was  a constant  action  and  reaction  of  social  energy, 
from  the  state  to  the  individual  and  back  from  the  individual  to 
the  state  again. 

The  power  of  the  state  spreads  out  to  increase  the  power  of 
every  member,  and  with  this  help  every  member  began  an  advance 


25 


which  increased  his  own  power,  and  this  new  power  returns  to  in- 
crease the  whole  power  of  the  state  which  again  sends  out  a new 
impluse  to  every  member. 

The  state  is  thus  designed  to  increase  the  benefits  of  its  mem- 
bers, and  its  members  gaining  advantage  from  its  increase  of 
power  return  a renewed  power  to  the  state  which  goes  the  same 
round  continuously  increasing  the  social  energy. 

Every  advance  that  is  made  in  domesticating  flocks  and  herds, 
in  tilling  the  soil,  in  accumulating  property,  in  new  discoveries  and 
inventions,  in  wresting  secrets  from  Nature,  and  in  harnessing  her 
forces  should,  one  and  all,  increase  the  power  of  the  body  politic 
as  a whole  and  should  return  increased  benefits  to  every  member 
by  raising  wages,  by  raising  the  standard  of  living,  and  by  a gen- 
eral diffusion  of  wealth  among  them. 

If  the  equal  action  and  reaction  of  this  social  energy,  or  value, 
from  the  state  to  the  individual  and  from  the  individual  to  the 
state,  is  in  any  way  interfered  with  then  inequality  in  the  distri- 
bution of  wealth  begins  to  manifest  itself,  and  the  natural  rise  in 
wages  stops. 

The  principles  of  taxation  enter  here,  taxes  are  the  instru- 
ments which,  when  properly  used,  will  maintain  an  equilibrum  be- 
tween benefits  and  burdens.  But  when  taxes  are  unjustly  levied 
and  assessed  the  returns  of  some  individuals  to  the  the  state  are 
out  of  all  proportion  to  their  benefits,  and  a few  retain  and  accu- 
mulate, unearned  wealth  at  the  expense  of  many  others  who  are 
compelled  to  make  up  the  loss,  and  return  much  more  than  they 
receive. 

It  is  the  office  of  money  to  measure  out  these  benefits  so  they 
may  he  properly  apportioned.  When  we  «ay  a man  has  so  many 
dollars'  worth  of  property  we  tell  the  proportion  of  value  possessed 
by  him. 

Each  member  of  society  should  always  be  in  possession  of  his 
share  of  the  common  and  universal  gain  in  value,  and  he  should 
receive  in  addition  a sum  which  will  balance  his  service  to  the 
state. 

There  is  a constant  supply  of  value  being  maintained  all  the 
time  by  the  activity  of  all  the  social  forces,  and  there  is  a con- 
stant necessity  for  measuring  and  distributing  this  value  by  the 
use  of  money. 

In  the  beginning  of  the  evolution  of  society  the  first  appear- 
ance of  value  could  not  make  itself  felt  as  a distinctive  force  be- 


26 


cause  it  was  common  to  all  people,  and  because  it  must  in  some 
way  be  measured  before  it  could  be  realized. 

Money  had  its  origin  in  the  necessity  for  distributing  the 
gains  of  power  arising  on  account  of  the  increasing  co-operation 
among  the  members  of  society. 

In  the  early  beginning  there  was  nothing  to  distribute,  and  no 
occasion  for  measurement,  but  as  soon  as  individuals  were  moved, 
by  a consciousness  of  their  tribe,  to  display  ability  in  many  direc- 
tions, and  as  soon  as  property  began  to  develop,  a measure  of  some 
kind  became  necessary. 

It  was  essential  that  property  should  be  able  to  move  and  ex- 
change among  these  early  people,  because  such  exchange  would 
again  augment  the  power  of  every  individual  and  the  power  of 
the  entire  body. 

The  men  most  skillful  in  any  one  direction  would  hold  the 
products  of  such  skill  in  less  esteem  than  other  products  that  were 
difhcult  for  them,  but  easy  for  another. 

In  this  way  trade  made  a faint  beginning  by  the  exchange  of 
commodities,  or  barter,  the  individual  giving  up  what  cost  him  less 
power  in  exchange  for  something  that  would  cost  him  more  power 
if  he  produced  it  himself,  thus  marking  out  a line  of  least  resist- 
ance in  production  and  of  greatest  attraction  in  exchange,  giving 
rise  to  demand  and  supply. 

This  simple  form  of  barter  is  an  exchange  of  forces,  com- 
monly called  utilities,  which  may  be  said  to  reside  in  the  things 
exchanged,  but  it  was  yet  a long  step  before  an}^  idea  or  name  at- 
tached to  such  utility. 

Gradually  one  product  of  more  general  utility  than  others, 
began  to  be  used  as  a measure,  and  to  take  on  the  functions  of 
money. 

As  soon  as  fifteen  or  twenty  kinds  of  products  were  produced 
barter  involved  a considerable  loss  of  time  and  waste  because  in 
a trade,  quite  simple  in  its  terms,  days  might  be  consumed  in  ar- 
ranging its  many  details. 

There  was  a path  opened  for  the  development  of  money  by 
the  time  and  energy  that  could  be  saved  with  its  use,  and  this 
saving  is  the  source  of  the  value  of  money  independent  of  the 
value  of  any  commodity  that  for  the  time  is  used  as  money. 

Money  began  its  existance  in  the  form  of  some  commodity 
more  desirable  than  others  so  that  it  could  circulate  by  measuring 


27 


its  own  general  utility  against  the  less  general  utility  in  other 
things. 

This  kind  of  money  had  very  narrow  limits,  it  was  subject 
to  decay  and  consumption,  and  its  quantity  and  value  was  never 
stable,  then  again  as  such  a commodity  became  more  and  more 
useful  as  a money,  and  saved  much  time  and  trouble,  the  value 
would  rise  in  such  a way  as  to  make  any  common  commodity  too 
valuable,  and  for  this  reason  the  precious  metals  soon  became  the 
money  of  the  world. 

The  precious  metals  had  the  properties  that  early  made  them 
the  natural  selection  for  money,  for  they  could  not  be  consumed, 
were  universally  esteemed,  and  of  a value  high  enough  so  that 
the  value  of  money  could  not  easily  rise  above  them  and  put  them 
out  of  use. 

It  is  well  to  remember,  in  considering  the  use  of  precious  met- 
als as  money,  that  such  money,  for  a long  period,  was  in  the  form 
of  rings  and  ornaments  of  various  kinds,  and  coined  money  came 
into  existance  as  a necessity  of  taxation  and  sovereignty. 

We  need  only  to  recall  the  most  important  function  of  money 
to  understand  the  order  and  history  of  its  development. 

Money  must  be  made  more  desirable  than  anything  else,  or 
the  purpose  of  Nature  in  the  development  of  money  would  be  de- 
feated, because  if  some  other  thing  was  more  desirable  than  money 
it  would  become  the  incentive  of  laber,  and  Nature  might  fail  to 
direct  labor  in  the  way  she  wants  it  to  go. 

Barter  proceeded  then  from  one  commodity,  used  for  a time 
as  money,  to  another  commodity  in  the  order  of  their  desirability, 
the  commodity  more  generally  desirable  driving  out  and  displac- 
ing one  less  desirable. 

In  this  advance  the  commodity  used  as  a measure  was  looked 
upon  as  in  itself  possessing  the  utilities  of  everything  for  which 
it  could  be  exchanged,  and  the  idea  of  utility  apart  from  the  ob- 
ject itself  began  to  form  in  the  mind. 

The  idea  of  value  came  up  from  this  idea  of  utility,  and  the 
manner  of  its  development  is  interesting  and  instructive  as  we  may 
suppose  it  to  have  arisen  by  a study  of  the  use  and  functions  of 
money. 

A hungry  man  will  be  driven  by  his  hunger  to  seek  food,  but 
the  moment  he  is  satisfied  he  may  be  expected  to  wait  until  he  is 
hungry  again  before  he  will  exert  himself. 


28 


But  as  desires  multiplied,  and  the  means  to  gratify  them  in- 
creased on  every  side,  there  was  born  a continual  unrest  of  hunger 
in  a multitude  of  forms,  and  at  the  same  time  money  developed 
in  such  a way  that  is  was  only  by  the  possession  of  money  that 
this  great  variety  of  appetites  could  be  satisfied,  and  in  this  way 
money  took  on  the  objective  power  of  securing  the  satisfaction  of 
every  appetite. 

When  the  precious  metals  became  the  coined  money  of  the 
world  then  value  may  he  said  to  have  .acquired  an  objective  ex- 
istance  in  the  human  mind,  because  then  money  became  purely 
a power  to  purchase,  and  had  all  the  elements  of  a force. 

The  development  of  money  follov^ed  in  the  path  which  was 
made  by  saving  time  and  energy  by  its  use,  and  as  the  saving  in- 
creased the  value  of  money  increased,  and  the  medium  used  as 
money  kept  continually  adjusting  itself  to  this  growing  fund. 

The  development  of  money  is  parallel  with,  and  best  illus- 
trated by,  the  development  of  thought  and  speech,  because  money 
accomplishes  for  the  body  politic  the  exchange  that  thought  and 
speech  accomplishes  for  the  individual. 

In  the  beginning  of  speech  a few  objects  only  can  be  said  to 
have  been  intelligible  to  men  by  names,  and  such  names  were  an 
imitation  of  the  objects  themselves,  as  near  as  sounds  could  im- 
itate. The  first  forms  of  speech  were  accompanied  by  gestures 
of  the  hands,  face  and  body  thus  demonstrating  the  difficulty  of 
the  earliest  speech,  as  was  the  case  with  primitive  barter. 

It  was  a long  time  after  men  could  exchange  words  and  talk 
intelligently  before  an  alphabet  was  invented,  which  is  comparable 
to  a coined  money. 

By  the  use  of  the  alphabet  names  began  to  impart  abstract 
ideas  without  requiring  a representation  by  picture,  or  by  sounds 
of  the  object. 

So  money  came  up  the  line  of  ascent,  starting  as  a consuma- 
ble commodity. 

It  occupied  a long  time,  and  required  many  exchanges  and  a 
great  amount  of  dickering  among  traders,  before  a crude  idea  of 
money,  like  a crude  language,  made  its  appearance  among  men. 

But  like  all  other  forms  of  development,  which  are  slow  and 
difficult  in  the  beginning,  and  are  afterwards  accelerated,  money 
soon  became  the  most  perfect  measure  of  value  that  could  be  con- 
ceived. 


CHAPTER  III. 


A MEASURE  OF  VALUE. 


The  way  the  value  of  money  acts  as  a measure  of  value  is  not 
nearly  so  simple  as  it  may  first  appear. 

We  are  in  the  habit  of  regarding  money  as  a creature  of  law 
rather  than  a most  intricate  product  of  evolution,  and  it  seems  as 
though  the  government  need  only  to  coin  a quantity  of  money, 
and  the  holders  of  this  money  in  some  way  determine  prices  and 
fix  values,  and  that  measuring  is  done  by  buyer  and  seller. 

But  Nature,  by  some  mysterious  process,  does  the  measuring 
for  us,  and  we  find  we  have  little,  or  no  control,  over  the  amounts 
of  money  we  receive,  or  the  prices  we  pay. 

We  are  creatures  of  a market,  more  or  less  determined  in  ad- 
vance for  us,  and  we  must  accept  such  wages  as  we  can  get  and  pay 
such  prices  as  have  been  fixed  for  us. 

This  is  equally  true  for  the  common  laborer  and  the  great 
financier,  and  he  who  finds  millions  coming  his  way  is  as  helpless 
in  causing  such  a flow  as  the  common  laborer  is  helpless  in  the 
low  wages  he  is  compelled  to  accept. 

This  difference  between  the  men  who  control  millions,  and 
the  men  who  scramble  for  dollars,  is  a difference  of  the  market  in 
which  they  happen  to  deal. 

In  the  case  of  labor  value  is  divided  into  pennies,  and  his  cal- 
culations are  made  on  such  a basis,  while  in  great  financial  centers 
the  penny  becomes  a thousand  dollars,  and  it  is  relatively  as  easy 
to  accumulate  a thousand  dollars  at  one  market  as  it  is  to  get  a 
dollar  at  another. 

Between  the  men  who  deal  with  pennies  as  counters,  and  the 
men  who  deal  with  thousand  dollars  as  counters,  in  the  same  way, 
are  all  the  intermediate  grades. 

We  are  apt  to  say  without  thinking  that  demand  and  supply 
repudiate  prices  and  thus  dismiss  a great  subject  without  an  idea 
of  what  is  meant  by  demand  or  supply. 


30 


Demand  is  not  a want  or  desire^,  but  a demand  is  a definite 
quantity  of  value  put  into  action  by  a definite  want  or  desire. 

Twenty-five  cents  spent  for  sugar  is  a demand  for  sugar,  while 
a group  of  children  looking  into  a candy  store  with  hungry  eyes 
expresses  a strong  desire  for  sugar  but  no  demand. 

Remembering  that  demand  is  a definite  quantity  of  value  in 
action  we  get  the  controlling  side  of  prices. 

Out  of  the  total  value,  Nature,  in  some  way  that  we  do  not 
understand — makes  a number  of  divisions  of  the  fund  and  thi& 
gives  rise  to  the  demands  of  every  kind,  and  we  keep  producing 
the  supply,  and  increasing  it,  until  we  get  to  the  lowest  margin  of 
profit. 

If  wheat  is  considered  as  an  example,  we  find  that  Nature 
allows  the  United  States  to  spend  about  four  hundred  million  dol- 
lars a year  for  wheat,  and  the  supply  comes  up  until  the  profit 
is  at  its  margin ; the  same  is  true  with  other  sources  of  supply. 

The  action  of  value  in  demand  and  the  reaction  of  the  supply, 
in  determining  prices,  is  limited  however  to  what  we  should  call 
simple  values  and  what  is  commonly  known  as  commodities. 

If  we  were  to  leave  the  discussion  here,  as  is  'commonly  the 
ease  in  political  economy,  we  would  omit  about  two-thirds  of  the 
prices  in  the  country. 

In  addition  to  prices  of  goods  of  every  description  there  is  a 
vast  quantity  of  fixed  property  the  price  of  which  depends  upon 
the  rate  of  profit  at  which  it  capitalizes. 

Leaving  property  in  land  out  of  the  discussion  it  is  held  by 
economists  that  the  value  of  all  other  fixed  property,  as  railways, 
factories,  homes,  etc.,  is  determined  by  the  value  of  the  labor  and 
materials  of  which  they  are  composed,  and  that,  therefore,  there 
is  no  other  regulation  of  prices  but  by  the  demand  and  supply. 

This  is  only  true  to  a limited  extent,  in  as  much  as  the  prices 
of  such  fixed  property  can  not  fall  below  the  cost  of  reproduction, 
speaking  generally. 

As  we  go  up  the  scale  of  fixed  property,  from  the  simple  to 
the  more  and  more  complex,  the  value  of  such  property  will  rise 
relatively  higher  than  its  cost  of  production  and  be  determined 
by  a rate  of  profit. 

The  more  stable  the  property  the  lower  the  rate  at  which  it 
will  capitalize  and  the  higher  its  price,  and  the  greater  the  dif- 
ference between  its  cost  of  production  and  its  value. 


31 


Tlie  price  of  land  depends  upon  the  lowest  rate  of  profit  which 
has  been  fixed  outside  by  the  development  of  other  fixed  capital, 
and  while  much  land  that  is  valuable  returns  no  profit  because  it 
is  not  put  to  its  highest  use,  its  price  is  determined  by  the  profit^ 
able  land  of  the  same  class. 

With  a given  demand  each  year,  this  is  to  say  with  a given 
sum  to  be  spent  for  goods  and  for  investment  each  year,  we  may  be 
Tsure  it  would  now  divide  into  three  parts,  one  part  going  for  our 
living  in  buying  consumable  goods,  another  part  in  consumers 
capital,  in  building  houses,  factories  and  the  like,  and  the  re- 
maining part  for  investment  in  land  and  other  stable  and  fixed 
forms  of  property. 

Having  a fixed  sum  each  year  to  spend,  the  amounts  going 
for  investments  pure  and  simple  limits  the  amounts  that  may  be 
used  to  promote  the  activity  of  society  and  sustain  the  life  of  its 
members. 

As  a nation  we  are  limited  in  our  income  and  expenditures  in 
the  same  way  that  individuals  are  limited,  and  the  expenditures 
of  all  individuals  in  any  year  limits  the  nation. 

It  will  not  do  to  say  that  next  year  we  may  produce  three 
times  as  much  as  we  produced  this  year  and  have,  therefore,  three 
times  as  much  to  spend,  because  the  chain  of  activities  does  not 
start  with  production,  as  is  commonly  supposed,  but  ends  there. 

What  we  may  produce  next  year  is  limited  by  the  amount  we 
may  have  to  spend,  and  it  is  not  the  other  way  so  that  we  could 
say  that  what  we  will  spend  next  year  will  depend  on  what  we  pro- 
duce. 

Production  is  limited  by  the  circulation  of  value,  and  unless 
we  adopt  some  measure  to  put  more  value  into  circulation  we  are 
limited  one  year  by  the  circulation  of  the  year  preceding  from 
which  there  may  be  a small  gain  or  loss. 

In  considering  the  market  from  which  the  activity  in  produc- 
tion gets  its  support  it  is  necessary  to  consider  the  entire  market, 
the  market  for  investment  and  the  market  for  production. 

While  we  must  admit  that  the  investment  market  does  not 
promote  activity,  encourage  industry,  or  forward  development,  but 
is  merely  a change  in  ownership  of  fixed  property,  yet  its  influence 
on  the  other  market  is  far  reaching  and  often  most  disastrous. 

We  can  see  that  for  some  reason  the  labor  market  compared 


32 


with  the  investment  market  is  badly  crippled,  that  whereas  we 
could  easily  produce  from  two  to  three  times  as  much  goods  as 
we  now  can  market,  yet  in  the  investment  market  we  find  value 
for  investment  accumulates  much  faster  than  new  property  and 
pushes  down  the  rate  of  profit  and  raises  prices  out  of  all  relation 
to  costs  of  production. 

While  there  is  no  outlet  in  this  investment  market  for  the  ac- 
cumulation of  surplue  value,  except  in  lower  rates  of  profit  and 
higher  prices  for  land  and  other  property,  the  same  value  could 
find  an  unlimited  outlet  if  it  could  increase  wages  and  add  its  force 
to  the  market  for  commodities. 

What  we  need  to  discover  is  the  cause  of  this  paradox  of 
value,  this  accumulation  every  year  for  investment  on  one  side 
while  great  masses  of  people  are  chained  to  a life  of  drudgery  for 
the  need  of  this  self  same  value  on  the  other  side. 

There  is  some  interference  with  Nature^s  apportionment  and 
measurement  of  value,  hack  behind  the  market,  that  must  be  the 
cause  of  this  disproportion  of  value  going  to  labor  on  one  side,  and 
piling  up  for  useless  investment  on  the  other  side. 

Manifestly  it  can  not  he  natural  that  such  great  sums  of  idle 
value  should  be  constantly  seeking  investment  only  to  force  up 
prices  of  land  and  securities  of  every  kind  while  millions  of  fam- 
ilies are  forced  to  live  way  below  the  standard  of  our  civilization 
because  this  very  value  does  not  come  to  them. 

Both  the  idle  capital  and  the  idle  and  underpaid  labor  are 
alike  a menace  to  our  civilization,  and  have  come  from  causes 
which  no  men  have  sought  to  impose  on  their  fellows,  and  which 
110  class  would  knowingly  sustain. 

This  inequality  in  the  entire  distribution  of  wealth,  and  in 
the  daily  distribution  which  follows  a similar  proportion,  is  the 
cause  of  widespread  discontent,  and  of  many  theories  to  remedy 
the  evil. 

It  is  generally  held  that  the  measurement  of  benefits  is  to 
blame,  and  while  one  class  of  reformers  lay  the  cause  to  a monop- 
oly of  money,  the  Socialists  go  much  deeper  and  would  take  hold 
of  property  itself  to  restore  equality. 

Socialists  may  be  said  to  regard  unequal  distribution  as  be- 
ing a natural  product  of  evolution  coupled  with  human  greed  for 
private  property,  and  that  the  situation  requires  heroic  measures 
for  relief. 


83 


They  would  take  the  apportionment  of  benefits  into  their 
own  hands,  doin^y  away  with  all  forms  of  investment  by  making 
fixed  property  the  property  of  the  State. 

The  chief  question  to  consider  from  the  Socialist  standpoint 
is  whether  our  unequal  condition  is  a result  of  evolution  and  can 
be  remedied  by  human  beings  taking  to  themselves  the  task  of 
controlling  development. 

We  need  to  ask  whether  Nature  does  not  show  capacity  to 
manage  society  better  than  human  beings  can  manage  it,  and  to 
ask  if  the  whole  trouble  has  not  arisen  because  we  have  attempted 
to  regulate  and  control  where  we  should  have  kept  our  hands  off? 

We  need  to  look  at  evolution  from  the  right  side  and  from 
the  only  logical  side,  and  when  we  do  we  must  credit  evolution 
with  the  benefits  we  have  secured,  and  we  must  charge  the  fail- 
ures, that  have  scattered  ruins  of  civilization  along  the  history  of 
the  human  race,  to  the  ignorance  of  man  and  to  his  want  of  sym- 
pathy for  his  fellow-man. 

The  government  that  endures  and  rises  above  the  ruins  of 
human  governments  is  the  government  of  Almighty  God,  with  its 
laws  of  unfailing  justness  and  equality. 

It  is  not  enough  that  our  sympathy  for  suffering  humanity  is 
the  mainspring  of  our  actions  and  we  are  moved  by  good  inten- 
tions, for  the  poet  has  wisely  observed  that  ^^Hell  is  paved  with 
good  intentions.^’ 

A useful  rule  to  remember  in  discussing  remedies  for  social 
ills  is  that  we  will  never  learn  the  wrong  we  suffer  until  we  learn 
the  right,  and  we  will  never  be  permitted  to  compromise  with  the 
wrong  because  we  have  not  discovered  the  right. 

Although  there  is  a great  deal  of  truth  in  Socialism,  yet  suc- 
cess requires  the  whole  truth,  and  their  plan  to  substitute  human 
intelligence  to  measure  and  apportion  social  benefits  in  place  of 
Divine  Intelligence  is  open  to  serious  objection. 

It  seems  to  the  writer  that  Socialists  fail  utterly  to  compre- 
hend the  marvelous  adjustment  of  forces  that  bring  about  the 
natural  regulation  of  values,  and  the  wonderful  complexity  of 
measurement  required  to  maintain  an  equilibrium  in  society. 

To  regulate  production  Socialists  see  but  two  simple  elements 
— labor  and  materials — and  they  conceive  that  all  forces  can  be 
reduced  to  terms  of  labor  and  all  substances  to  terms  of  materials 
measured  by  labor. 


34 


This  scheme  denies  at  first  hand,  and  as  a primary  proposi- 
tion, that  natural  law  regulates  production,  and  assumes  that 
inequality  in  the  distribution  of  the  wealth  arises  from  human 
greed  instead  of  human  ignorance. 

But  the  problem  of  measurement  in  the  distribution  of 
wealth,  we  will  easily  discover,  is  not  nearly  so  simple  as  the  good 
intention  of  Socialism  would  have  us  believe. 

Not  only  is  it  necessary  to  measure  out  social  energy  every 
day  according  to  the  progress  of  that  day,  or  to  the  failure  of  that 
day,  hut,  what  is  vastly  more  important,  the  present  daily  appor- 
tionments are  made  with  due  regard  to  a plan  of  civilization  cen- 
turies of  the  future  ahead  of  us,  and  what  human  being  may  he 
so  hold  as  to  say  that  he  could  regulate  production  with  due 
regard  to  the  future  destiny  of  the  human  race  f 

The  problem  of  economic  measurement  is  not  a simple  ques- 
tion of  labor  as  the  only  force,  and  products  of  labor  as  the  only 
material. 

The  evolution  of  society  is  brought  about  by  the  co-operation 
of  all  physical,  all  vital,  all  chemical  forces  and  all  substances, 
including,  and  taking  into  account,  their  manifold  and  inestimable 
qualities. 

Nature  has  accomplished  a pooling  of  every  imaginable  force 
and  item  of  substance  in  society  by  the  development  of  value, 
and  controls  progress  by  the  laws  she  compels  value  to  follow. 

Consider  how  production  changes  by  recalling  to  mind  that 
the  factor}^  system  began  almost  in  the  middle  of  the  19th  cen- 
tury, and  did  not  result  from  human  greed  or  foresight,  nor  come 
because  of  human  legislation,  but  was  a result  of  laws  of  value 
world-wide  in  their  scope. 

A pair  of  shoes — how  simple  it  seems  in  the  market,  and  yet 
how  difficult  to  unravel  the  forces  that  to-day  engage  in  the  pro- 
duction of  a pair  of  shoes,  and  what  changes  have  come  when  we 
remember  that  some  of  our  grandfathers  were  their  own  cattle 
raisers,  tanners  and  shoemakers  all  in  one. 

How  intricate  is  the  measuring  that  needs  now  to  be  done  to 
apportion  and  distribute  the  value  of  a pair  of  shoes  when  a large 
part  of  society  is  engaged  indirectly  in  producing  them. 

The  raw  material  for  a shoe  factory  comes  from  farms  and 
mills  scattered  all  over  the  world,  and  these  farms  and  mills  keep 
other  farms  and  mills  employed. 


35 


A shoe  factory  is^,  itself^  an  important  part  of  the  life  and  in* 
diTstry  of  some  town  or  city. 

The  city  government  where  the  factory  is  located  contributes 
a part  in  the  making  of  shoes,  the  schools  of  the  city  and  country 
help  to  make  shoes  by  keeping  up  the  standard  of  intelligence. 

Physicians,  dentists,  lawyers,  etc.,  engage  in  shoe  making 
when  they  save  life  or  time  for  the  inhabitants  of  the  town  where 
the  factory  is  located. 

Outside  the  factory  town  is  the  county  and  state,  and  the  effi- 
ciency in  shoemaking  is  influenced  by  them. 

Beyond  the  state  is  the  country  at  large,  and  beyond  the 
country  is  the  civilized  world,  in  some  way  indirectly  connected 
with  shoemaking. 

Along  with  the  labor  and  capital  that  is  directly  engaged  in 
shoemaking,  and  which  we  all  see  clearly  must  be  paid  out  of  the 
market  price  of  shoes,  is  the  other  world  of  labor  and  capital  indi- 
rectly engaged  in  the  same  industry,  but  only  touching  it  at  many 
points,  and  all  this  secondary  labor  and  capital  must  also  be  paid 
out  of  the  market  price  of  shoes  as  much  as  they  contribute  to  the 
product. 

The  circulation  of  money,  which  pays  wages  of  every  descrip- 
tion, which  pays  taxes  and  incomes  of  all  kinds,  gets  the  value 
from  the  retail  market  for  goods. 

Society  at  large  releases  certain  amounts  of  value  for  every 
industrial  channel,  and  the  products  coming  to  the  market  have 
their  measure  taken  by  money  and  have  their  prices  fixed  in  con- 
formity to  the  whole  amount  of  value  which  is  released  for  that 
purpose. 

The  importance  of  a proper  market  price  has  never  been  ap- 
preciated by  economic  writers,  who  always  conclude,  off-hand,  that 
a low  competitive  price  is  the  best  price  for  all  concerned. 

When  we  remember  that  the  retail  market  price  must  carry 
with  it  the  value  that  pays  for  everything,  for  wages  of  every  de- 
scription, for  profits,  for  all  capital,  for  all  incomes  and  taxes,  we 
begin  to  discover  the  reason  a general  fall  in  prices  produces  a 
panic  and  such  wide  disaster. 

The  monopoly  price  is  assumed  to  be  unjust  because  it  is  rela- 
tively higher  than  other  competitive  prices,  which  are  taken  un- 
justly, and  without  reason,  for  a standard  of  comparison. 


36 


The  monopoly  price,  on  the  contrary,  is  the  natural  price, 
and  is  the  price  Nature  would  establish,  and  does  establish, 
wherever  she  is  not  interfered  with,  and  the  highness  of  the  mo- 
nopoly price,  fixed  by  relative  competition,  is  its  chief  virtue  be- 
cause it  carries  with  it  the  wages  for  teachers,  doctors,  lawyers 
and  government  employes  of  all  kinds,  and  all  other  payments  for 
services. 

At  present  this  monopoly  price  does  not  obtain  for  goods  ex- 
cept they  are  controlled  by  great  combinations  of  capital,  but 
nearly  all  income-bearing  property,  which  greatly  exceeds  the 
value  of  all  goods,  sells  always  at  its  monopoly  price. 

Nature  has  produced,  and  has  always  on  hand,  a quantity  of 
value  sufficient  with  which  to  allow  every  commodity  in  our  mar- 
ket to  sell  at  its  true  monopoly  price,  but  on  account  of  human 
institutions  diverting  this  value  from  its  true  channels  it  piles  up 
in  every  market  to  compete,  and  for  useless  investment. 

Just  as  a trust,  by  controlling  the  market,  can  take  advantage 
of  this  monopoly  price  and  keep  the  gain  instead  of  distributing  it 
in  higher  wages,  so  also  other  strong  property,  notably  property 
in  land,  takes  up  and  absorbs  the  value  that  should  go  into  trade. 

We  can  see  when  shoes  are  sold  at  the  store,  and  taken  away 
to  be  consumed,  the  value  of  them  begins  to  be  redistributed  and 
the  last  element  in  production,  the  merchant,  is  the  first  to  be 
paid,  and  after  him  in  succession  all  other  contributors  are  paid 
until  we  reach  the  beginning  of  the  production,  which  is  paid  last. 

It  may  seem,  to  the  reader,  that  distribution  does  not  occur 
in  this  order,  owing  to  the  advance  payments  the  merchants  are 
required  to  make  to  secure  a stock  of  goods  in  the  first  instance, 
and  to  replenish  the  stock  as  the  sales  deplete  it. 

But  the  capital  invested  by  merchants  in  stocks  of  goods  is 
in  the  nature  of  a loan  to  society  upon  which  interest  charges  are 
added  and  collected  from  the  consumers. 

This  again  is  an  illustration  of  the  backward  conduction  of 
value;  of  the  chain  of  proceeding  from  cause  to  effect,  the  value 
of  goods  is  held  at  the  center  and  only  attaches  to  goods  as  they 
come  into  the  market,  and,  therefore,  can  only  be  redistributed 
after  they  are  sold. 

The  explanation  of  the  market  price  by  political  economists 
is  almost  the  opposite  of  an  explanation  of  the  facts,  they  hold 


37 


tliat  the  price  of  any  good  in  the  market  is  a result  of  additions 
which  commence  with  the  first  work  done  and  the  first  material 
used  and  is  added  to  with  every  change,  or  handling,  until  the 
market  is  reached,  when  the  sum  of  all  the  lower  costs  are  united 
to  make  the  market  price. 

This  is  now  generally  admitted  to  he  an  error  because  it  fails 
utterly  to  agree  with  the  facts,  and  because  if  it  was  true  there 
could  be  no  such  declines  in  prices  as  result  in  panics. 

The  market  price  is  made  by  society  in  some  mysterious  way, 
and  is  a result  of  a chain  of  evolution  which  has  established  a 
path  for  value. 

From  the  market  price  all  the  costs  and  profits  are  sub- 
tracted, and  all  the  elements  entering  into  production  are  paid, 
the  last  element  being  paid  first  and  the  first  element  being  paid 
last. 

Hence  it  follows  that  production  comes  to  a sudden  stop 
when  a fall  in  prices  is  passed  down  the  line  to  where  it  has  its 
beginning  and  an  attempt  is  made  to  take  away  the  profits  of  the 
employing  capital  or  reduce  the  wages  of  labor  below  the  standard 
of  living. 

This  mystery  of  prices  being  measured  out  for  us  at  the  cen- 
ters of  social  activity,  and  being  determined  by  some  kind  of  a 
clearing  between  every  social  force,  is  one  of  the  secrets  of  Nature 
that  we  may  never  have  explained. 

The  laborer  in  a country  village  in  Kansas,  when  he  buys  a 
pair  of  shoes,  may  be  paying  a part  of  the  salary  of  the  President 
of  the  Argentine  Republic. 

But  by  what  process  of  apportionment  such  services  can  be 
added  to  the  price  of  a pair  of  shoes,  and  by  what  paths  such 
minute  fractions  of  value  can  return  to  their  source,  may  never 
be  explained  to  us. 

Although  we  may  never  unravel  the  intricate  mystery  of 
])rices,  owing  to  the  complexity  of  evolution,  yet  a study  of  devel- 
opment may  help  us  to  form  an  idea  of  the  general  plan  by  which 
value  flows  in  large  streams  before  it  sub-divides  and  balances  into 
})rices. 

We  may  learn  something  by  a study  of  the  backward  conduc- 
tion of  value,  by  discovering  the  reason  that  the  latest  elements 
entering  into  the  production,  or  exchange  of  goods,  are  paid  in 
advance  of  the  primary  elements. 


The  first  steps  of  progress  are  always  the  most  difficult  to 
take,  and  each  succeeding  step  becomes  easier  until  a habit  is- 
formed,  and  doing  work  in  a particular  manner  becomes  a second 
nature  to  us. 

In  the  production  of  shoes  we  must  admit  that  the  first  pair 
was  by  far  the  most  difficult  and  costly,  consumed  large  quantities 
of  energy,  wasted  much  material  and  occupied  considerable  time. 

We  may  imagine,  for  the  purpose  of  illustration,  that  the 
making  of  the  first  pair  of  shoes  required  the  maker  to  wait  until 
the  cattle  for  the  hide  was  ready  for  the  killing,  and  then  to  pre- 
pare and  tan  the  hide  and  wait  on  the  tanning,  to  make  his  own 
tools,  and  after  a long  time,  and  much  toil  and  waste  of  mate- 
rial, shoes  of  a very  inferior  quality  make  their  appearance. 

While  this  is  not  the  true  history  of  the  first  pair  of  shoes, 
strictly  speaking,  it  is  near  enough  the  truth  to  demonstrate  the 
lines  of  progress. 

In  this  illustration  the  lines  of  advancement  and  improve- 
ment are  clearly  defined  and  shoemaking  would  expand  as  an  in- 
dustry by  saving  in  three  directions;  the  first  would  be  a saving  of 
labor,  the  second  a saving  in  time,  and  the  third  a saving  in  mate- 
rial, and  progress  of  the  whole  would  continually  be  helped  by  a 
better  product,  by  better  shoes. 

What  is  saved  in  each  instance  is  a gain  in  power,  leaving  that 
power  free  to  make  more  shoes  without  any  increase  in  expend- 
iture. 

Therefore,  as  a result,  the  shoe  industry  would  welcome  any 
help  from  any  other  lines  of  development  that  would  save  labor, 
or  time,  or  material  in  making  shoes,  because  such  help  would  be 
able  to  pay  themselves  out  of  their  own  savings,  and  leave  some- 
thing over  for  the  benefit  of  shoemaking  in  general. 

For  this  reason  evolution  in  every  industry  brings  new  forces 
into  it  that  help  it  along,  and  these  forces  must  be  paid  out  of 
what  they  save,  and  are,  therefore,  paid  first,  or  paid  before  the 
earlier  processes. 

Some  forms  of  property  quite  foreign  to  all  methods  of  pro- 
duction, and  entirely  removed  from  the  labor  and  cajntal  engaged 
in  producing  goods,  are  strong  enough  to  pick  up  much  of  this 
saving  without  in  any  way  contributing  to  it,  and  when  this  is 
done  there  is  a shortage  in  the  supply  of  value,  more  goods  are 


39 


produced  than  can  be  sold,  and  there  is  not  enough  value  to  pass 
back  so  as  to  pay  labor  the  necessary  wages  and  pay  the  necessary 
jDrotits  .to  capital.  The  value  of  land  and  the  value  of  franchises 
are  notable  examples  of  property  of  this  kind  that  absorb  the  sav- 
ings made  by  inventions  and  improvements. 

To  reduce  our  problem,  of  the  evolution  of  industry,  to  more 
scientific  terms,  we  may  say  that  in  order  to  make  a beginning  in 
any  line  of  development  we  will  have  a definite  quantity  of  force 
with  which  to  work  and  this  force  expends  itself  in  overcoming 
the  difficulties,  or  the  resistances,  in  the  way,  and  in  doing  so  con- 
sume a definite  amount  of  time. 

In  the  line  of  ascent  in  every  industry  there  will  be  gains 
made  by  an  increase  in  the  force  available,  and  by  diminishing  the 
resistances,  and  by  saving  in  time. 

We  may  imagine  a trade  in  shoemaking  having  been  started, 
and  such  a trade  is  really  the  making  of  a path  along  which  the 
forces  of  society  expend  themselves  with  less  and  less  resistance 
to  overcome,  and  as  this  one  trade  develops  and  helps  along  other 
trades  it  is  itself  helped  by  them. 

The  principle  we  are  trying  to  demonstrate  is  that  in  the  de- 
velopment of  industries,  and  in  the  development  of  new  desires  at 
the  same  time,  paths  are  being  made  along  which  social  forces 
expend  themselves,  and  the  measurements  of  social  forces  are  in 
some  way  accomplished  by  these  paths. 

We  might  illustrate  this  idea  by  the  nervous  system  of  our 
bodies,  and  by  the  manner  in  which  the  paths  for  nerve  force 
branch  out  and  sub-divide,  an  impulse  of  force  from  the  center 
carries  force  along  its  paths,  each  of  which  is  proportioned  to 
carry  the  amount  of  force  required  for  a particular  work  of  the 
body. 

The  lines  and  branches  of  every  industry  lead  to  points 
wherever  that  industry  may  receive  and  give  support  to  any  other. 

During  development  the  social  energy  will  push  out  its  paths 
along  the  lines  of  least  resistance,  but  in  obedience  all  the  time  to 
the  general  plan  for  the  evolution  of  society. 

There  is  in  progress  all  the  time  an  orderly  development 
which  implies  a constant  increase  or  growth  of  social  energy,  and 
a constant  pushing  of  this  social  energy  along  lines  of  develop- 
ment in  obedience  to  natural  law. 


40 


The  valuation  of  every  product  by  the  central  society  becomes 
a necessity  of  complex  development  because  it  is  only  at  industrial 
centers  that  a balance  of  forces  can  be  maintained^,  and  only  at 
such  points  that  the  exact  proportion  could  possibly  be  made. 

All  manner  of  industries  from  the  most  simple  farming  to 
the  most  complicated  manufacturing  are  connected  together  by 
paths  of  force,  and  are  ever'receiving  and  giving  a variable  assist- 
ance to  each  other. 

The  amount  of  social  energy,  in  the  form  of  value,  going  out 
along  its  paths  is  subject  to  considerable  variation  which  would 
necessitate  the  constant  equalization  of  forces,  and  constant  meas- 
urement by  money,  which  is  shown  by  changing  prices. 

The  price  of  any  commodity,  as,  for  instance,  five  dollars  for 
a pair  of  shoes,  is  not  a measured  amount  of  shoe  labor  and  shoe 
material,  as  it  is  commonly  supposed. 

Five  dollars’  worth  of  shoes  is  to  say  that  the  social  power  of 
a pair  of  five-dollar  shoes  is  equal  to  five  dollars  in  value,  and  this 
is  determined  by  a pooling  of  all  kinds  of  energy  by  society  and 
then  an  apportioning  the  proper  share  to  the  pair  of  shoes. 

The  labor,  and  other  activities,  by  which  shoes  are  produced 
form  a part  of  the  whole  social  energy,  and  this  shoemaking  en- 
ergy must  come  to  the  center  where  it  will  be  adjusted  with  every 
other  productive  energy  and  be  equalized,  and  then  an  amount  of 
value,  equal  to  this  adjusted  and  equalized  power,  will  attach  to 
the  product  and  from  the  product  will  flow  back  to  pay  labor  and 
capital. 

This  is  the  law  of  value  by  which  demand  arises,  and  the  rea- 
son more  value  does  not  flow  back  to  labor  in  every  industry  is  be- 
cause there  is  a robber  between  the  valuation  of  society  and  the 
valuation  of  the  product  that  is  strong  enough  to  take  everything 
that  labor  and  capital  can  be  forced  by  competition  to  give  up. 

All  manner  of  activity  in  society  may  be  said  to  be  comiected 
by  paths  to  some  central  directing  Intelligence;  this  activity  is 
then  reduced  to  its  equivalent  value,  and  then  this  value  is  redis- 
tributed along  these  paths,  going  back  always  in  the  same  ratio 
that  the  activity  sent  its  force  to  the  central  station,  provided  it 
is  not  interfered  with. 

We  say,  then,  that  for  any  given  time,  the  activity  of  any  so- 
ciety consists  of  a definite  amount  of  social  forces,  resulting  in  a 


41 


definite  quantity  of  social  products,  but  before  any  product  may 
know  where  it  belongs,  in  the  social  scale,  these  definite  social 
forces  are  combined  into  an  equivalent  and  definite  sum  of  value, 
and  this  value  should  attach  to  each  product  in  the  ratio  of  its 
social  importance. 

This  value  divides  first  into  great  streams,  the  whole  of  the 
force  producing  goods  receiving  first  a whole  amount  of  value 
equivalent  to  such  force,  and  then  this  stream  sub-divides  into 
grand  divisions  for  each  department,  and  each  of  these  divisions 
sub-divide  into  innumerable  branches,  which  fix  the  great  varieties 
of  prices  of  goods  of  every  kind. 

In  considering  this  perfect  automatic  action  of  natural  law 
regulating  prices,  and  controlling  the  order  of  development,  the 
reader  must  not  conceive  the  idea  that  human  intelligence  plays 
no  part  in  the  social  plan  and  is  only  a higher  developed  form  of 
labor. 

Intelligence  is  doubtless  one  of  the  ends  in  view  for  which  all 
this  evolution  is  proceeding,  and,  inasmuch  as  happiness  is  the 
mainspring  of  our  actions,  and  as  the  field  for  happiness  con- 
stantly extends  and  the  quality  of  happiness  becomes  more  ex- 
quisite, a more  perfect  intelligence  develops  as  a means  to  direct 
and  control  us  in  our  pursuit  of  happiness. 

But  at  the  same  time,  in  giving  to  the  intelligence  of  human 
beings  a high  place  in  I^ature,  we  must  not  lose  sight  of  its  finite 
limits,  and  must  not  forget  that  we  depend  after  all  upon  infinite 
intelligence  to  enable  human  intelligence  to  become  self-con- 
scious. 

We  never  know,  from  within  ourselves,  of  what  intelligence 
really  consists,  and  during  the  history  of  mankind,  and  during  our 
passing  existence,  much  false  coin  passes  current  for  good  and 
true  intelligence. 

It  is  probably  safe  to  say  that  we  develop  mental  capacities 
in  great  variet^q  but  only  such  capacity  as  is  in  harmony  with 
Divine  Intelligence  remains  in  the  world  to  become  a basis  of 
higher  intelligence  in  man. 

The  true  intelligence  in  the  world  may  be  said  to  be  the  resi- 
due that  remains  after  mental  developments  have  passed  through 
the  melting  pots  of  hard  experience  and  have  become  refined  and 
harmonize  with  that  higher  and  infinite  intelligence  at  whose  sug- 
gestion human  intelligence  starts  in  life. 


CHAPTER  IV. 


THE  RATE  OF  INTEREST. 


This  much-discussed  subject  is  not  nearly  so  difiicult  and 
complex  as  modern  writers  of  political  economy  would  have  us 
believe. 

Interest  must  be  studied  from  the  standpoint  of  the  facts, 
and  the  theories  that  fail  to  explain  any  of  the  facts,  or  explain  all 
of  them,  must  be  abandoned. 

To  attempt  to  discover  the  origin  of  interest  by  leaving 
money  out  of  the  discussion,  as  the  Austrian  Economists  are  at- 
tempting to  do,  is  more  difficult  than  to  play  Hamlet  with  Hamlet 
cut  out  of  the  play. 

The  common  idea  of  interest,  that  it  is  paid  for  the  use  of 
money,  is  the  correct  idea,  and  is  the  result  of  meffis  experience  in 
business. 

The  reader  must  be  able  to  distinguish  interest  from  profits, 
interest  is  paid  for  the  use  of  money  and  profits  are  paid  for  the 
use  of  capital. 

Economists  attempt  to  lump  all  such  payments  as  being  made 
for  capital,  and  to  call  all  such  payments  interest. 

Money  is  not  capital,  but  it  is  a distinct  evolution  much  older 
than  capital,  and  has  its  own  peculiar  functions  to  perform  which 
are  distinct  from  the  functions  of  capital. 

The  payment  of  interest  depends  upon  the  laws  of  the  distri- 
bution of  wealth,  and  has  its  origin  in  the  backward  conduction  of 
value. 

Money  must  be  advanced  to  capital  and  labor  to  secure  co-op- 
eration and  to  gain  advantages  in  production,  because  the  value 
of  products  is  never  fixed  until  after  they  come  into  the  market, 
and  products  are  never  paid  for  until  after  they  are  sold,  and  the 
labor  and  capital  directly  engaged  in  producing  them  is  paid  last. 

On  this  account  money  lends  to  labor  and  capital  a most 
valuable  assistance,  and  takes  its  pay  out  of  the  saving  it  estab- 
lishes by  its  use. 


43 


There  are  two  sides  to  the  interest  problem  equally  impor- 
tant. One  depends  upon  the  nature  and  functions  of  money,  and 
the  other  upon  the  backward  circulation  of  value  which  calls 
money  into  use  and  by  which  the  benefits  of  civilization  are  dis- 
tributed. 

Money  is  a labor-saving  and  time-saving  device,  the  use  of 
which  causes  an  increase  in  social  energy  and  an  increase  in  value, 
and  this  increase  in  value  gives  rise  to  profits  out  of  which  interest 
is  paid. 

The  interest  paid  for  the  use  of  money  comes  out  of  the  in- 
creasing volume  of  value  which  appears  first  in  the  market  and  in- 
creases prices  and  profits. 

Lending  money,  after  all  has  been  said,  is  only  a higher  form 
of  exchange,  and  the  banker  and  money  lender  is,  under  normal 
conditions,  only  a more  universal  merchant  and  manufacturer 
than  the  men  directly  engaged,  because  in  lending  money  they  be- 
come silent  and  conditional  partners  in  every  business  to  which 
their  money  gives  assistance. 

As  society  develops,  as  commodities  increase  in  quantity  and 
variety,  and  as  inventions  and  improvements  increase  the  social 
energy,  there  is  a corresponding  increase  in  the  total  amount  of 
value  which  becomes  profits  first  before  it  is  redistributed,  and 
money  is  paid  its  interest  out  of  this  profit. 

From  the  redistribution  of  these  profits,  by  building  houses, 
factories,  railroads,  etc.,  a new  source  of  energy  is  developed,  and 
a new  series  of  profits  must  he  paid  to  capital  on  account  of  the 
assistance  given  by  these  improvements  to  society. 

As  all  these  sources  of  gain  develop  there  comes  into  exist- 
ence corresponding  quantities  of  new  value^  and  as  the  costs  of 
production  are  constantly  lowered  large  margins  of  profits  make 
their  appearance. 

This  increase  in  the  quantity  of  value  greatly  increases  the 
volume  of  business  and  increase  the  use  and  necessity  for  money. 

The  lending  of  money  is  based  upon  the  development  of  so- 
ciety by  the  redistribution  of  profits,  and  interest  is  a payment 
made  out  of  profits  for  the  use  of  the  value  of  money  by  which 
profits  are  secured. 

It  is  a mistake  to  assume  that  the  sums  paid  for  interest  are 
paid  out  of  the  earnings  of  labor  or  capital,  and  are  an  interfer- 


44 


ence  with  production,  and  are  a cause  of  the  unequal  distribution 
of  wealth. 

Just  the  contrary  is  true,  and  interest  is  paid  on  account  of 
the  assistance  given  to  labor  and  capital  by  money,  and  because  it 
promotes  a wider  distribution  of  wealth. 

On  account  of  the  superior  stability  of  the  value  of  money 
the  rate  of  interest  is  much  lower  than  rates  of  profit,  leaving  a 
margin  to  borrowers  and  enabling  them  to  promote  development 
and  encourage  a wuder  diffusion  of  wealth  by  the  use  they  make 
of  money. 

We  are  confronted  with  vast  accumulations  of  idle  capital 
that  can  not  be  put  to  use  and  are  constantly  competing  and  inter- 
fering with  natural  rates  of  profit  by  driving  them  down  to  the 
interest  rate  for  mone}^,  but  money  is  not  responsible  for  this  con- 
dition. 

The  competition  of  idle  capital  has  a tendency  to  lower  all 
profits  to  the  low  level  of  interest  for  money,  notwithstanding  the 
stability  in  value  of  money  and  the  hazard  in  business,  and,  as  a 
result,  there  is  a large  percentage  of  failures  in  every  line  of  en- 
deavor on  account  of  insufficient  profit. 

According  to  the  law  of  profits  the  rate  should  vary  with  the 
quantity  of  value  engaged  and  with  the  risk  involved. 

Speaking  for  society  as  a whole  the  general  rate  will  decline 
with  the  general  increase  in  wealth  and  with  the  increase  in  the 
stability  in  government. 

The  natural  rate  of  profit  for  different  lines  of  products 
should  vary  considerably,  and  the  highest  rate  should  be  with  per- 
ishable commodities,  and  the  lowest  rate  with  fixed  business  prop- 
erty in  the  center  of  a city. 

Such  commodities  as  fruits  and  vegetables,  the  time  of  which 
is  short  owing  to  their  liability  to  decay,  should  carry  the  widest 
margins  of  profit  because  the  price  is  subject  to  the  widest  fluctua- 
tions. 

As  we  go  up  the  scale  to  where  there  is  an  increase  in  sta- 
bility of  products  and  in  the  quantity  consumed,  there  should  be 
a corresponding  decline  in  the  profit. 

Passing  from  commodities  to  factories  we  will  find  the  high- 
est profit  naturally  with  such  plants  whose  product  is  subject  to 
sudden  changes  in  fashions  or  changes  from  new  development. 


45 


The  value  of  money  must  be  more  stable  than  the  value  of  the 
best  property  because  it  must  always  be  interchangeable  with  the 
best  property  without  loss^  and^  therefore,  the  rate  of  interest 
should  be  lower  than  the  rate  of  profit  for  the  safest  capital. 

To  sustain  the  rate  of  interest  below  the  lowest  rates  of  prof- 
its the  amount  loaned  on  any  property  is  always  considerably  less 
than  its  value,  thus  guarding  the  value  of  money  against  fluctua- 
tions, and  the  time  of  the  loan  is  limited  so  as  to  be  able  to  renew 
this  security  of  money  before  changes  in  value  occur. 

The  qualities  required  by  Nature  in  the  medium  we  use  as 
money  are  quite  simple,  and  are  determined  by  the  laws  which 
regulate  the  circulation  of  value. 

Money  must  possess  the  power  of  taking  up  a value  of  its  own 
independent  of  the  value  of  the  substance  out  of  which  money 
may  be  coined. 

Money  must  give  up  this  value  in  every  exchange  to  the  com- 
modity to  which  the  value  belongs,  and  must  immediately  take  up 
the  same  measure  of  value  again  from  the  general  supply. 

Money  must  measure  value  as  it  attaches  to  commodities  and 
property,  and  must  at  all  times  measure  changes  in  value  by 
changes  in  prices,  and  for  this  reason  the  value  of  money  must  be 
more  certain  and  secure  than  the  value  of  any  other  property. 

Equal  relations  in  society,  upon  which  all  economic  equality 
depends,  are  based  upon  this  relation  of  value  in  different  kinds  of 
products,  and  upon  the  value  they  contain  being  always  in  its  true 
relation  to  the  whole  value. 

That  money  may  perform  its  various  functions,  without  loss 
to  any  class  in  society,  it  is  essential  that  every  dollar  shall  have 
identically  the  same  value,  and  every  multiple  of  dollars  shall 
have  a value  of  exact  multiplication  of  the  unit. 

A thousand  dollars  must  be  a thousand  times  as  valuable  as 
one  dollar,  and  a penny  must  always,  and  ever  be,  the  one-hun- 
dredth part  in  value  of  a dollar. 

Money  must  not  possess  any  power  of  increase,  or  change; 
it  must  not,  like  a commodity,  be  subject  to  fluctuations  and  ever 
be  worth  more  or  less  than  it  costs. 

The  changes  in  value  in  other  things  must  be  the  motive  for 
the  circulation  of  money  and,  therefore,  money,  itself,  must  not  be 
subject  to  such  changes. 


46 


Money  must  have  a basis  for  its  value  because  it  must  be  ex- 
changeable  at  any  time  for  simple  property,  such  as  commodities, 
and  for  income-bearing  property. 

This  necessity  for  a stable  value  in  mone}^,  superior  to  the 
value  of  commodities,  that  are  subject  to  sudden  changes  and  to 
fixed  property  that  changes  only  during  long  periods  of  time,  has 
given  rise  to  what  is  known,  all  over  the  world,  as  a gold  basis. 

Gold  developed  as  the  chief  money  metal  on  account  of  the 
stability  of  its  value,  which  was  a result  of  its  limited  quantity 
coupled  with  its  qualities  as  a metal  that  made  its  possession 
tilmost  universally  desirable  among  people  of  wealth. 

In  order  to  appreciate  the  position  of  money  the  reader  must 
have  a clear  conception  of  its  value,  and  gold  money  offers  the  best 
obtainable  illustration. 

Gold  may  be  said  to  have  a double  existence;  one  life  de- 
pends upon  its  use  as  money,  and  the  other  upon  its  use  as  gold. 

From  an  economic  standpoint  gold  can  not  be  both  money 
and  gold  at  the  same  time  because  value  determines  its  economic 
standing. 

When  gold  is  coined  into  money  it  ceases  to  be  gold;  that  is 
to  say,  it  loses  all  its  gold  characteristics  and  acquires  all  the 
characteristics  of  money,  and  a paper  dollar  and  a gold  dollar,  of 
equal  value,  become  identical. 

For  this  reason,  whenever  the  money  value  falls  below  the 
gold  value,  then  gold  goes  out  of  circulation  and  into  the  arts, 
and  the  reverse  happens  when  money  value  is  higher  than  gold 
value  then  gold  flows  to  such  points. 

With  the  increase  in  wealth  of  the  world  the  quantity  of  gold 
became  utterly  inadequate  to  supply  the  world  with  money,  and 
the  value  of  gold  could  not  rise  above  its  commodity  value,  while 
the  money  value  of  the  world  greatly  increased  beyond  the  value 
of  all  the  gold. 

Under  these  conditions  paper  money  came  into  existence  to 
supply  and  make  up  the  deficiency  of  gold,  and  in  order  to  make 
a stable  value  for  this  paper  money  it  was  given  a gold  basis;  that 
is  to  say,  it  was  made  redeemable  in  gold. 

The  amount  of  money  that  will  circulate  in  any  country 
without  causing  fluctuations,  and  changes  in  prices,  is  determined 
by  laws  of  value  and  is  always  a certain  ratio  of  the  whole  amount 
of  value. 


47 


When  a country  depends  upon  the  value  of  gold  for  the  unit 
of  value  of  its  money,  and  can  not  get  enough  gold  with  which  to 
fill  out  its  allotted  circulation,  it  may  issue  paper  money  to  the 
point  of  saturation  of  its  money  value  without  a dollar  of  such 
money  ever  having  to  he  redeemed  in  gold,  because  this  paper 
money,  in  such  case,  would  take  up  the  exact  amount  of  value 
that  gold  would  have  taken  up  had  enough  gold  been  obtainable. 

But  the  moment  the  paper  money  exceeds  such  quantity — 
that  is,  the  moment  the  paper  money  passes  the  point  of  satura- 
tion— it  is  plain  that  the  money  value  instead  of  being  divided 
into  units,  of  which  gold  is  the  measure,  is  divided  into  more  units 
of  which  paper  money  is  the  measure,  and  they,  consequently, 
have  a value  lower  than  gold. 

Then  it  follows  that  gold,  being  cheaper  in  one  country 
measured  by  a paper  unit,  than  in  another  country  measured  by 
a gold  unit,  will  flow  to  its  dearest  and  best  market. 

This  necessitates  the  redemption  of  paper  by  gold  so  that  the 
paper  money  can  not  pass  the  point  of  saturation  and  divide  the 
money  units  into  units  of  less  value  than  the  gold  basis. 

The  question  now  presenting  itself  for  solution  is  the  reason 
for  this  exceptional  stability  in  the  value  of  gold  that  leads  all 
nations  of  the  civilized  world  to  adopt  it  as  a standard  of  monetary 
value. 

This  question  will  he  easily  answered  and  easily  understood 
if  the  reader  will  bear  in  mind  the  two  great  classes  of  property 
in  every  community,  namely,  goods  of  every  description  and  prop* 
erty  hearing  an  income. 

Money  must  have  a value  so  stable  that  it  is  not  effected  by 
changes  in  prices  of  commodities  which  are  subject  to  wide  fluc- 
tuations, and  its  value  must  he  more  stable,  also,  than  income 
property,  which  is  slow  to  change  in  price. 

The  producer  of  wheat,  when  he  sells  his  product  for  its  value 
in  money,  must  know  that  he  can  buy  income-bearing  property 
for  this  money  on  the  same  basis  of  value,  and  the  property  owner, 
when  he  sells  his  property  must  know,  also,  that  he  can  buy  com- 
modities on  the  same  basis  as  he  sells. 

If  the  quantity  of  money  could  increase  arbitrarily,  then  the 
money  prices  of  commodities  would  rise  out  of  all  proportion  to 
income  property,  because  they  would  advance  under  an  inflation 
of  currency  while  fixed  property  remained  stationary,  thus  giving 
undue  advantage  for  the  time  to  sellers  of  commodities. 


4S 


The  reason  gold  became  the  standard  measnre  of  the  civiKzed 
^mrld  was  becanse  a balance  was  always  kept  between  the  valne  of 
gold,  the  value  of  commodities,  and  the  value  of  income  property. 

This  stability  in  the  value  of  gold  was  a result  of  national 
debts,  and  of  the  constant  borrowing  by  the  governments  of  the 
world  who  thus  became  buyers  of  gold  in  large  quantities,  for 
which  they  paid  with  bonds,  giving  a bond  bearing  a definite  rate 
of  interest  for  a fixed  weight  of  gold. 

In  this  way  gold  became  possessed  of  the  property  of  being 
convertible,  at  the  option  of  the  owner,  for  the  very  best  and  most 
stable  form  of  income  bearing  property  in  existance,  and  this  fixed 
its  status  for  all  income  property,  for  being  readily  received  for 
the  best  property  it  was  necessarily  in  greater  demand  for  prop- 
erty not  quite  as  good. 

Hence,  it  follows  that  a gold  basis,  for  monetary  value,  is 
misleading  because  behind  the  gold  is  a basis  of  value  higher,  wider 
and  deeper  than  gold;  the  basis  for  the  value  of  all  income  prop- 
erty— namely,  the  power  of  commanding  a fixed  and  definite  rate 
of  interest  or  profit. 

Since  all  governments  have  been  compelled  to  buy  gold  at  a 
fixed  rate  of  interest,  which  rate  of  interest  depended  upon  the 
credit  or  stability  of  the  government,  it  follows  that  the  value  of 
gold  developed  an  international  and  world  wide  stability. 

There  are,  however,  several  important  considerations  pointing 
to  the  rapid  displacement  of  gold  as  a money  metal  not  far  in  the 
future. 

The  first  of  these  is  the  increasing  use,  and  stability  in  value, 
of  paper  currency  which  fills  the  natural  requirements  of  money 
better  than  gold  because  the  value  of  paper  will  depend  solely  upon 
the  free  money  value  of  society  and  will  not  be  complicated  by  a 
commodity  value. 

The  second  consideration  is  the  need  in  the  arts  for  gold, 
which  makes  the  use  of  gold  money  an  expense  that  is  being  op- 
posed at  all  times,  by  the  laws  of  the  conservation  of  value. 

This  expensiveness  of  gold,  on  account  of  its  commodity 
value,  and  the  loss  by  wear,  confines  gold  to  be  used  almost  wholly 
as  a reserve  by  banks  and  government  treasuries. 

The  third  consideration  is  the  steady  and  certain  increase  in 
the  output  of  gold  from  the  mines,  which  will  soon  saturate  the 
demand  for  gold  as  a reserve,  because  all  requirements  for  reserves 
will  soon  be  filled  by  this  increased  production. 


49 


This  saturation  of  gold  reserves  will  force  gold  into  circula- 
tion in  competition  with  paper,  and  will  do  away  with  the  redemp- 
tion of  paper  by  gold,  and  in  this  competition  gold  will  be  defeated 
and  will  return  to  pile  up  in  banks  and  treasury  vaults  just  as  sil- 
ver did  in  its  day. 

But  more  important  than  the  foregoing  considerations  will  he 
the  development  and  extension  of  international  trade  by  which 
war  will  he  abolished  and  the  stability  of  government  will  be  se- 
cured. 

This  increase  in  trade  will  make  a new  market  for  securities 
of  all  governments  which  will  be  used  in  the  settlement  of  balances 
in  place  of  gold. 

Then  will  follow,  as  a logical  conclusion,  the  redemption  of 
the  paper  money  of  every  country  by  the  bonds  of  that  country, 
and  then  the  value  of  paper  will  become  international  and  will  be 
based  upon  a bond  bearing  a fixed  rate  of  interest. 

Furthermore  the  value  of  paper  can  be  made  more  stable  than 
gold  has  ever  been,  and  at  the  same  time  such  a currency  can  be 
made  as  elastic  in  quantity  as  the  demands  of  business  may  re- 
quire. 

Gold  basis  money  depends  upon  the  erratic  demands  of  gov- 
ernments for  loans,  which  demands  are  subject  to  wide  fluctu- 
ations, and  which  must  effect  the  money  of  the  entire  civilized 
world. 

A paper  money  may  be  made  redeemable  in  government 
bonds,  at  the  will  and  option  of  the  holders  of  currency,  and  in  this 
way  there  will  never  be  a departure  between  the  simple  values  of 
commodities  and  the  compound  values  of  income  bearing  prop- 
erty. 

The  elasticity  of  a paper  money  may  be  made  practically  per- 
fect by  the  issue  of  currency  bonds  bearing  a rate  of  interest 
slightly  lower  than  the  loaning  rate  for  money,  so  that  the  de- 
mands for  currency  in  business  would  not  be  interferred  with  by 
the  demands  for  currency  bonds. 

Any  government  could  issue  its  paper,  which  is  made  inter- 
convertible with  a currency  bond,  until  the  surplus  of  money 
caused  a demand  for  bonds  and  then  the  issue  of  currency  would 
cease  and  currency  bonds  would  be  issued  and  the  money  coming 
in  for  exchange  of  bonds  would  be  destroyed. 


50 


These  currency  bonds  going  out  would  at  once  become  the 
currency  barometer  and  would  indicate  the  need  of  society  for  cur- 
rency because  as  a demand  for  money  arose  the  bonds  would  come 
back  for  redemption  in  currency  to  go  into  circulation,  thus  keep- 
ing up  the  supply  of  money  to  the  point  where  the  quantity  of 
money  equalled  and  took  up  the  value  provided  by  Nature  for  that 
purpose. 


CHAPTER  V. 


THE  CIRCULATION  OF  MONEY. 

In  studying  the  circulation  of  money  we  study,  at  the  same 
time,  the  distribution  of  wealth,  and  we  find  our  subject  so  com- 
plicated by  unequal  wealth  that  we  may  have  some  difficulty  in 
separating  the  principles  of  circulation  from  the  interferences. 

We  are  about  to  attempt  the  diagnosis  of  a body  that  is  racked 
with  pain  and  weakened  with  disease  without  having  a healthy 
body  with  which  to  make  comparison. 

The  body  politic,  in  all  its  history,  has  never  known  what  we 
may  call  a period  of  healthy  development,  because  with  the  be^ 
ginning  of  the  increase  in  wealth  there  began  at  the  same  time  an 
unequal  and  unjust  distribution  of  that  wealth. 

We  must  depend  upon  our  knowledge  of  science  and  upon  our 
ability  to  follow  natural  law  through  the  mazes  of  development, 
in  order  to  discover  the  proper  distribution  of  wealth  and  to  dis- 
cover the  cause  of  interference  with  such  distribution. 

It  seems  as  though  the  best  plan  would  be  to  ignore,  for  the 
time,  the  facts  of  unequal  distribution  and  seek  out  the  laws  of 
natural  distribution,  and  then  return  to  our  subject  and  follow 
the  processes  by  which  the  equal  distribution  is  changed  to  concen- 
tration. 

If  we  can  demonstrate  that  the  application  of  correct  prin- 
ciples in  our  politics  will  be  followed  by  a correction  in  the  dis- 
tribution of  wealth  we  may  consider  we  have  proven  our  case. 

Certain  fundamental  ideas  must  not  be  lost  to  our  sight  if 
we  expect  to  follow  the  path  of  circulation  and  understand  the  dis- 
tribution of  wealth. 

The  most  important  of  these  is — Value,  because  it  is  the  most 
fundamental. 

We  must  remember  all  the  time  that  we  are  dealing  with  laws 
of  value  and  with  the  movement  or  circulation  of  value,  and  that 
money  and  goods  only  follow  where  value  leads  them. 

We  must  remember  that  there  is  a limit  in  the  quantity  of 


52 


value  which  is  not  fixed  by  the  quantity  of  goods,  hut  which  fixes 
the  quantity  of  goods. 

We  must  remember  that  the  quantity  of  value  is  governed 
by  the  quantity  of  forces  co-operating  in  society,  and  rises  as  these 
forces  rise,  and  falls  as  these  forces  fall. 

We  must  not  lose  sight  of  the  fact  that  labor  and  capital  pro- 
ducing goods  do  not  produce  the  value  of  such  goods,  and  the  value 
of  products  is  a result  of  social  adjustments  and  measurements  in 
which  all  the  co-operating  forces  are  balanced  against  all  the  pro- 
ducts according  to  the  needs  of  society  at  large  and  not  according 
to  the  needs  of  individuals. 

It  is  society  at  large  that  tells  a laborer  what  kind  of  product 
to  make  by  the  value  it  places  on  the  product,  and  drives  labor 
away  from  useless  employments  by  denying  value  to  his  products. 

When  the  bicycle  came  into  the  market  its  value  bore  no  re- 
lation to  its  cost  of  production  because  society  saw  fit  to  encourage 
a rapid  increase  of  bicycles  by  a valuation  that  allowed  an  abnor- 
mal profit. 

With  a clear  idea  of  value  the  next  step  in  importance  is  a 
clear  idea  of  the  backward  conduction  of  value,  and  of  its  circula- 
tion. 

According  to  this  idea  distribution  of  wealth  does  not  rise 
with  labor  and  capital  and  proceed  to  the  other  members  of  so- 
ciety but  rises  with  society  and  goes  back  to  labor  and  capital  last 
instead  of  first. 

Value  appears  first  as  a social  force  and  attaches  to  goods  af- 
ter they  are  produced  and  appear  in  the  market,  and  when  the 
goods  are  sold  then  the  distribution  of  this  value  takes  place,  no 
other  conclusion  can  be  made  to  agree  with  the  facts. 

It  has  been  assumed,  and  accepted  without  question,  that  la- 
bor was  first  in  production  and  value  was  one  of  the  products  of 
labor,  but  the  self-evident  truth  is  that  value  is  first  and  labor  is 
one  of  the  products  of  value.  Value  directs  labor  in  the  way  it 
shall  go  and  prevents  it  being  wasted  in  useless  effort. 

In  discussing  the  circulation  of  money  we  must  necessarily 
deal  with  a society  so  far  advanced  as  to  have  developed  money, 
but  as  we  have  examined  the  origin  of  value  and  of  money  we  need 
experience  no  difficulty  on  that  account. 

Money  circulates  because  the  activities  of  society  result  in  the 
appearance  of  value  a part  of  which  attaches  to  money,  and  the  re- 
mainder attaches  to  property. 


53 


Speaking  generally  there  are  two  great  divisions  of  value  cor- 
responding to  two  great  classes  of  products — circulating  value  and 
fixed  value. 

We  may  say  that  the  active  social  forces  should  he  balanced 
by  an  equivalent  active  or  circulating  value,  and  the  potential  so- 
cial forces  could  be  balanced  by  an  equivalent  fixed  or  potential 
value. 

It  may  be  well  to  attempt  to  draw  a line  between  the  active 
and  potential  social  forces  although  such  a line  can  not  be  made 
distinct. 

Of  the  active  forces  intelligent  labor  is  chief  and  next  are  the 
active  forces  of  growth  and  reproduction  in  animal  and  vegetable 
life,  and  to  these  we  may  add  the  active  mechanical,  chemical  and 
physical  forces. 

Of  potential  forces  the  chief  is  the  properties  of  materials, 
and  the  persistance  of  such  natural  forces  as  gravity,  the  heat  and 
the  light  of  the  sun,  and  the  organization  of  structures  of  all  kinds 
to  assist  the  active  forces. 

It  is  a law  of  compound  evolution  that  these  potential  forces, 
which  give  rise  to  the  value  of  fixed  property,  must  facilitate  the 
active  forces,  which  give  rise  to  circulating  value,  before  any  value 
will  attach  to  such  fixed  property. 

The  rate  of  income  of  fixed  property  will  measure  and  deter- 
mine the  quantity  of  value  it  may  contain  because  such  income 
measures  the  benefit  received  by  the  active  forces  from  such  prop- 
erty. 

To  make  this  matter  more  clear  we  may  say  that  all  the  active 
forces  of  society  give  rise  to  a sum  of  circulating  value  out  of 
which  all  wages  and  profits  and  incomes  are  paid,  and  the  incomes 
of  fixed  property  should  equal  the  benefit  received  from  such  prop- 
erty by  the  circulating  value. 

A dwelling  house  has  a definite  value  which  we  may  call  po- 
tential, and  the  amount  of  this  value  will  depend  upon  the  income 
it  can  command,  and  the  income  in  turn  will  depend  upon  the 
help  the  dwelling  will  give  to  the  active  forces  of  society. 

Although  value  thus  divides  into  two  great  classes  of  primary 
and  secondary  according  to  laws  of  simple  and  compound  evo- 
lution the  reader  must  not  get  the  idea  that  social  forces  do  not 
act  in  concert  and  divide  also. 


54 


All  forces  contributing  in  any  way  to  the  progress  of  the  body 
politic  act  together  as  one  single  force — just  as  life  unifies  the  com- 
plex forces  of  our  bodies — and  value  is  the  name  we  have  given 
this  force  in  its  united  and  single  power. 

And  although  value  is  redistributed  as  rapidly  as  it  appears 
and  attaches  to  property  and  products  of  industry  there  is  not, 
therefore,  any  sparate  action  of  such  forces. 

It  has  been  a great  mistake  in  political  economy  to  suppose 
that  social  activity  was  a result  of  a multitude  of  independent  la- 
bor forces  that  acted  in  concert  by  accident  only,  and  because  of 
human  legislation. 

This  division  of  value  into  primary  and  secondary,  or  into  cir- 
culating and  fixed,  is  important  not  only  in  understanding  the  dis- 
tribution of  wealth,  but,  also,  in  discovering  the  causes  of  unequal 
distribution. 

The  proper  distribution  of  wealth  depends  upon  the  natural 
proportion  being  always  maintained  between  simple  and  compound 
development. 

If  for  any  reason  the  increases  in  value  that  come  with  new 
development,  and  appear  in  the  centers  of  distribution,  fail  to  be 
redistributed  as  an  increase  in  wages  and  an  increased  circulation 
of  money,  the  industrial  forces  are  thrown  out  of  balance. 

As  a preliminary  to  the  circulation  of  money  there  must  exist 
a certain  industrial  activity  in  the  community  under  consideration. 

This  activity  will  be  balanced  by  an  amount  of  value  which  is 
equal  to  it,  and  this  value  must  be  considered  as  a unit  before  it 
is  measured  out  for  purposes  of  circulation. 

Simultaneous’with  this  activity,  and  this  appearance  of  value, 
will  be  the  appearance  of  products  to  which  this  value  will  be  meas- 
ured out  as  they  come  into  the  market. 

The  next  step  is  the  valuation  of  these  products  by  society 
and  then  money  begins  to  circulate  and  carry  back  the  payments 
to  labor  and  capital. 

As  has  been  explained  the  value  of  money  is  required  by  na- 
ture to  be  more  stable  than  values  of  any  other  kind,  because  this 
money  value  is  the  nearest  approach  we  have  to  the  force  itself. 

It  is  important  to  understand  and  appreciate  this  truth  if  the 
reader  would  understand  the  commanding  power  of  money  in  every 
financial  disturbance. 


55 


When  the  normal  circulation  of  value  is  interferred  with  and 
the  total  amount  of  value  suddenly  falls  as  in  a panic,  then  goods 
and  property  of  all  kinds  must  he  scaled  or  measured  down  to  a 
lower  price  and  a lower  basis  of  value,  money  does  not  change 
at  such  times  while  other  things  may  be  changing  rapidly. 

In  order  that  the  entire  amount  of  property  may  be  measured 
down  to  a lower  amount  of  total  value  it  is  necessary  that  great 
quantities  of  property  may  be  rapidly  exchanged  for  their  value  in 
money  so  as  to  establish  the  new  price,  hence,  there  arises,  for  a 
short  time,  an  enormous  demand  for  the  use  of  money  and  the  rate 
of  interest  may  increase  fifty  or  a hundred-fold. 

If  we  could  imagine  such  a suspension  of  activity  as  would 
practically  cut  off  the  income  of  property  and  wages  of  all  kinds 
there  would  be  a corresponding  decline  in  values,  hut  money  would 
hold  to  its  value  until  the  value  of  all  else  had  vanished. 

This  fact  will  give  us  a useful  rule  to  remember  in  the  concen- 
tration, or  in  the  distribution  of  wealth,  namely,  where  a country 
is  suffering  a relapse  in  its  progress,  by  panics  or  chronic  hard 
times,  the  owners  of  money  possess  an  enormous  advantage  over 
the  owners  of  property  because,  at  such  times,  the  value  of  prop- 
erty declines  while  the  value  of  money  remains  stationary,  profits 
are  destroyed  and  the  high  interest  for  the  use  of  money  becomes 
a heavy  burden. 

But,  on  the  contrary,  when  development  proceeds  according 
to  the  natural  order  then  the  producers  and  owners  of  property 
have  an  advantage  over  the  owners  of  money  because,  at  such 
times,  other  values  are  increasing  while  the  value  of  money  re- 
mains stationary,  and  profits  are  greatly  in  excess  of  the  rate  of 
interest  thus  diffusing  and  distributing  wealth. 

Circulation  begins  by  money  paying  out  the  value  of  society 
in  buying  commodities  for  sale  and  distributing  them  to  con- 
sumers. 

This  circulation  of  money  for  commodities  will  continue  as 
long  as  there  is  value  to  pay  out  for  that  purpose,  and  when  the 
supply  of  value  runs  out  then  circulation  may  continue  for  a time 
on  borrowed  value  until  the  market  is  glutted  with  goods. 

As  commodities  are  sold  to  retail  buyers,  and  taken  from  the 
market  to  be  consumed,  their  value  is  released  and  set  free  to  be 
again  taken  up  by  money  and  again  imparted  to  new  supplies  com- 
ing into  the  market. 


5^ 


As  a commodity  becomes  more  or  less  fixed  in  its  development 
there  will  be  definite  channels  of  value  more  or  less  fixed  which 
will  limit  production  to  definite  quantities  of  goods  and  the  market 
must  wait  for  one  supply  to  be  consumed  before  another  supply 
can  find  room. 

The  amount  of  value  appearing  in  the  market  which  fixes  the 
retail  price  of  goods  does  not  bear  any  definite  relation  to  the  value 
of  labor  or  capital  producing  such  goods,  but  is  usually  and  nat- 
urally much  higher  until  development  reaches  its  completion. 

The  reason  for  this  is  not  at  all  obscure  because  in  the  early 
beginning  of  industry  labor  can  not  command  higher  wages  than 
is  determined  by  its  own  unaided  efforts,  and,  as  a result,  wages 
start  on  a basis  of  labor  force  alone,  and  the  allied  forces  helping 
labor  give  rise  to  increases  in  the  total  value  which  become  profits 
to  buyers  and  sellers  in  the  market  and  to  employers  of  labor. 

It  follows,  therefore,  that  the  value  of  sfoods  in  thn  market 
should  carry  a wide  margin  of  profit,  and  this  in  its  turn  should, 
by  reinvestment,  increase  the  demand  for  labor  and  raise  wages. 

It  may  appear  at  first  sight  that  the  laws  of  nature  favor  the 
unequal  distribution  of  wealth  by  allowing  new  floods  of  value 
to  increase  the  wealth  of  the  mere  owners  of  money  and  accumula- 
tors of  property  who  find  their  possessions  increase  in  value  with- 
out appreciable  effort  on  their  part. 

To  a limited  extent  it  is  true  that  during  stages  of  rapid  de- 
velopment Nature  does  favor  the  originator,  and  developer  and 
builder  with  floods  of  value,  but  it  is  for  the  purpose  of  conserving 
value  and  of  bringing  about  economy  in  the  use  and  disposition  of 
her  forces. 

Some  plan  had  to  be  devised  to  induce  men  to  construct  so- 
ciety, to  build  homes,  to  build  cities,  to  make  improvements  in 
transportation,  and  to  apply  labor  saving  and  time  saving  devices, 
and  it  was  the  flow  of  profits  that  secured  these  results. 

There  is  an  extreme  beauty  and  simplicity  in  the  plans  of  Na- 
ture, and  their  wonderful  effectiveness  so  satisfies  the  mind,  and  so 
convinces  the  judgment,  that  we  feel  sure  no  other  plan  is  possible, 
and  so  all  men  and  all  minds,  must  at  last  agree  and  unite  with  Na- 
ture in  her  plan  and  thus  we  will  secure  perfect  co-operation  and 
harmony  in  society. 

But  Nature  does  not  allow  unequal  distribution  to  continue 


57 


for  any  length  of  time,  and  only  allows  it  so  as  to  secure  a better 
distribution  a little  later. 

We  must  remember  that  structures  of  every  kind,  and  pro- 
ducts of  all  kinds,  have  a relatively  short  life,  and  although  some 
men  may  naturally  secure  much  wealth  during  active  development, 
while  wages  remain  low,  the  natural  decay  of  all  property  tends 
ever  to  return  it  again  to  the  common  fund  and  wages  should  in- 
crease continually  from  the  redistribution  of  this  fund. 

And  although  this  profit,  which  is  the  basis  of  the  wealth  of 
merchants  and  employers,  comes  to  them  at  times  in  floods  of  value 
it  only  comes  because  they  increase  the  facility  of  labor  in  some 
way,  either  in  saving  of  time,  or  material  or  force. 

But  by  looking  a little  deeper  we  will  find  how  wonderful  is 
the  plan  that  guides  these  same  profits,  and  we  will  find  that 
Nature  does  not  suffer  them  to  go  to  capitalists  blindly  but,  to  use 
a slang  expression,  she  has  a string  tied  to  them  by  which  they 
are  pulled  back  to  become  higher  wages  for  labor. 

When  you  have  discovered  the  truth  that  the  conduction,  or 
circulation,  of  value  is  backwards  you  have  made  a great  step  in 
understanding  the  distribution  of  wealth,  and  when  you  follow 
these  profits  backwards  you  will  find  a law  of  redistribution  by 
which  these  increases  in  value  must  increase  the  standard  in  living 
or  civilization  will  be  destroyed. 

Thus  while  Nature  is  distributing  profits  most  generously 
with  one  hand,  to  all  her  workmen  who  aid  in  the  organization  of 
society,  the  other  hand  is  held  back  and  is  heavy  in  its  punishment 
for  the  society,  that  interferes  with  the  redistribution  of  these 
profits. 

It  should  now  be  clear  that  value  appears  first  as  a social  fund 
and  attaches  to  money  and  property,  and  the  gains  in  this  fund 
increase  the  values  of  property,  leaving  wide  margins  of  profits, 
and  these  profits  allow  accumulations  of  wealth  to  merchants  and 
employers  of  labor  who  become  capitalists  in  this  way. 

But  there  is  a simple  law  of  the  redistribution  of  these  in- 
creases in  value  that  requires  that  all  products  must  be  bought  and 
all  incomes  must  be  paid  out  of  the  wages  received  by  laborers. 

Here  we  come  to  what  may  seem  to  be  a paradox.  How  is  it 
possible  for  labor  to  buy  back  at  retail  a product  for  which  two  dol- 
lars is  demanded  when  the  total  wages  paid  in  producing  the  pro- 
duct were  but  one  dollar? 


58 


The  same  labor  producing  a product  and  getting  less  in  wages 
than  is  the  market  price,  can  not  buy  back  all  its  products,  but  we 
must  remember  there  are  other  laborers  to  be  provided  for  who 
must  be  paid  out  of  the  value  distributed  by  this  product. 

If  one-tenth  only  of  labor  was  engaged  in  producing  the  whole 
of  our  commodities,  and  the  other  nine-tenths  were  otherwise  em- 
ployed, the  value  of  such  commodities  on  the  market  must  be  high 
enough  to  pay  all  wages. 

This  is  to  say  that  the  volume  of  value  circulating  for  any 
definite  time,  say  for  one  year,  in  the  goods  market,  is  the  sum,  and 
the  only  sum,  at  our  disposal  with  which  to  pay  wages  and  buy 
back  the  goods. 

This  value  is  furnished  by  society  and  as  it  has  become  the 
property  of  a small  part  of  the  people  it  is  used  to  make  advance 
payments  by  loans  to  labor,  and  wages  are  paid  out  of  these  ad- 
vance payments  and  with  these  wages  all  goods  of  whatever  de- 
scription must  be  bought  and  all  incomes  and  taxes  must  be  paid. 

• We  can  see  these  facts  in  our  daily  experience  and  see  how 
the  market  for  goods  carries  with  it  the  value  that  pays  the  rail- 
roads the  freight,  the  rents  of  the  landlords,  profits  of  the  mer- 
chants, etc.,  and  how  in  this  way  millions  of  laborers,  not  directly 
engaged  in  production,  are  provided  with  the  value  from  which 
they  receive  their  wages. 

In  this  circulation  of  value — beginning  with  money  paid  out* 
in  the  market  for  goods,  and  this  money  carrying  value  back  along 
the  entire  wage  line — the  secondary  redistribution  is  more  impor- 
tant than  the  primary  distribution,  because  primary  production 
may  continue  for  a time  after  secondary  distribution  fails  and  the 
market  will  then  be  glutted  with  unsalable  goods. 

. When  the  volume  of  value  is  low  it  will  limit  the  volume  and 
the  price  of  goods  of  every  description  and  this  will  interfere  with 
wages  all  along  the  line  of  development. 

Hence,  it  follows  when  increases  in  value,  arising  from  an  im- 
provement in  production  or  from  any  increase  in  social  energy  by 
government,  by  education,  or  invention,  are  held  back  and  are  not 
redistributed  in  new  wages  or  in  increases  of  wages,  the  whole  cir- 
cle of  social  activity  is  interferred  with  because  primary  activities 
are  always  dependent  upon  secondary  redistribution,  and  second- 
ary activities  are  always  dependent  upon  primary  distribution. 


69 


This  is  to  say  that  wages  of  labor  of  one  kind  are  always  de- 
pendent upon  wages  of  labor  of  another  kind  and  all  other  pay- 
ments depend  upon  wages,  and  no  class  is  self-supporting. 

The  much  vaunted  independence  of  the  farmer  is  a myth  for 
he  depends  for  his  market  upon  the  wages  paid  in  manufacturing 
and  trading. 

These  floods  of  new  value  which  appear  first  as  profits,  and 
make  capitalists  out  of  the  thrifty  and  enterprising  members  of  a 
community,  carry  with  them  a correction  for  what  would  speedily 
become  an  unequal  distribution  of  wealth. 

The  reader  must  not  imagine  that  enormous  profits  pile  up  at 
all  times  for  every  capitalist  without  ever  encountering  a loss  and 
he  must  not  imagine  that  these  profits  would  be  permitted  to  be 
withdrawn  from  circulation  by  Nature. 

Profits  are  highest  where  the  risks  are  greatest,  and  where  the 
value  involved  is  least;  hence,  there  is  practically  an  unlimited 
field  for  participation  in  such  profits. 

But  the  losses  here  are  also  greatest,  and  our  experience  with 
losses  soon  lead  us  to  respect  the  natural  law  and  to  seek  safer  in- 
vestments at  lower  profits. 

The  greatest  quantity  of  profits,  or  new  value,  appears  regu- 
larly in  the  goods  market  and  come  periodically  with  the  market- 
ing and  consumption  of  goods. 

The  merchant  who  is  seeking  a profit  and  has  secured  his 
share  of  it  begins  immediately  to  encourage  an  increase  in  wages 
by  increasing  his  purchases. 

This  brings  about  a speedy  correction  of  profits  and  a wider 
distribution  because  the  former  gain  becomes  a new  demand  for 
labor,  and  an  increase  in  quantity  of  goods  is  followed  by  a lower 
price  and  lower  profits  and  an  increased  purchasing  power  of 
wages. 

What  may  appear  at  first  sight  as  a drain  upon  wages  in  this 
harvesting  of  profits  will  upon  close  examination  develop  into  an 
increase  in  the  wage  fund  unless  otherwise  prevented. 

Remember  that  the  law  of  redistribution  requires  that  pro- 
ducts must  be  bought  back  by  wages  in  order  to  keep  up  the  cir- 
culation of  value,  and  it  is  the  plan  of  Nature  to  constantly  in- 
crease wages  in  order  to  increase  social  activity. 

Suppose  a merchant  gains  from  profits  in  one  year  the  sum 


60 


of  ten  thousand  dollars,  this  gain  must  then  he  spent  either  to 
buy  an  increased  quantity  of  goods  or  to  construct  a building  giv- 
ing him  an  income. 

In  thus  spending  the  ten  thousand  dollars  this  sum  gets  back 
into  the  wage  fund  and  we  may  suppose  it  was  never  in  that  fund 
before,  and  it  must  therefore  employ  new  labor  or  else  increase  the 
wages  of  labor  already  employed. 

There  is,  then,  an  increase  in  the  circulation  of  money  of  ten 
thousand  dollars  which  has  passed  out  of  the  hands  of  the  mer- 
chant and  has  become  wages  in  the  hands  of  the  laborers. 

This  money  becoming  new  wages  of  laborers  who  will  employ 
in  turn  other  labor  as  soon  as  it  is  spent,  and  these  laborers  now 
take  the  place  of  the  merchant  as  employers  by  becoming  buyers 
of  commodities. 

Thus  it  follows  that  when  gains  in  business  are  spent  for  new 
development  they  continue  in  circulation  as  an  increase  in  the 
wage  fund,  and  after  the  merchant  has  spent  his  thousands  of  dol- 
lars we  may  allow  him  to  drop  out,  and  although  he  makes  no 
profit  in  succeeding  years  the  former  profit-should  continue  in  cir- 
culation and  would  do  so  unless  it  is  interfered  with. 

This  continual  circulation  of  value  from  wages  to  profits  and 
from  profits  back  to  increased  wages  is  only  comparable  to  the 
plant  and  the  seed;  as  the  plant  grows  to  maturity  it  produces  the 
seed  by  which  the  plant  is  reproduced  and  brings  forth  the  seed 
again,  and  once  started  this  process  continues  as  long  as  conditions 
are  favorable. 

This  continual  redistribution  of  the  increases  in  value  should 
go  on  until  all  labor  is  fully  employed  at  the  highest  wages  society 
at  large  can  afford  to  pay,  and  until  all  the  means  of  production 
are  fully  utilized. 

Every  new  laborer  put  to  work  should  add  more  by  his  activity 
to  the  total  value  than  he  can  get  in  a return  as  wages  be- 
cause a part  must  go  to  the  general  benefit,  and  every  extension 
of  development  to  new  lands,  and  streams,  and  mines,  and  every 
invention  and  improvement  in  morals,  in  education,  or  in  art  can 
but  serve  to  add  to  the  total  of  social  energy,  and  increase  the  total 
fund  of  value  and  should  continually  increase  wages  and  diminish 
rates  of  profit. 

But  to  return  to  the  merchant,  who  in  spending  his  gains  by 


61 


building  a structure  costing  ten  thousand  dollars  receives  an  in- 
•come  from  it,  you  may  ask  how  about  this  wealth,  does  it  not  come 
unearned  to  the  merchant  from  labor  in  general? 

We  have  demonstrated  that  the  value  taken  from  society  by 
the  merchant — ^namely — ten  thousand  dollars  in  profits — is  re- 
turned to  circulation  again  as  an  "increase  in  wages  as  it  is  spent 
in  building  and  the  mystery  to  he  solved  is  connected  with  the 
value  of  the  structure  which  gives  the  merchant  an  income. 

This  structure  will  have  a value  greater  or  less  than  ten  thous- 
and dollars,  and  its  value  has  no  connection  in  particular  with  the 
money  spent  for  it. 

In  order  to  he  valuable  this  building  owned  by  the  merchant 
must  in  itself  combine  an  organization  of  forces  and  of  properties 
of  materials  so  as  to  be  worth  as  much  to  society  at  large  as  the 
value  it  contains. 

To  make  our  subject  more  clear  let  us  suppose  the  merchant 
gave  away  his  ten  thousand  dollars  so  that  he  received  no  ben- 
efit himself  but  it  went  into  circulation  just  the  same  as  if  a 
building  had  been  constructed. 

It  is  clear  that  although  you  might  applaud  him  as  a benefac- 
tor yet  in  the  last  case  he  would  have  done  an  inujry  to  society  by 
his  charity  and  society  would  have  lost  the  benefit  it  should  have 
received  from  an  intelligent  investment  in  a needful  building. 

In  considering  whether  wealth  could  not  accumulate  with  in- 
justice in  this  manner  there  are  just  two  considerations  which 
demonstrate  conclusiyely  that  it  can  not. 

The  first  of  these  is  the  natural  decay  in  property  of  this 
kind  during  which  its  value  is  released  to  go  into  circulation  again 
for  new  construction  at  a much  higher  rate  of  wages  and  a much 
lower  rate  of  profit. 

When  development  is  not  interferred  with  profits  are  highest 
and  wages  are  lowest  during  the  early  stages  of  construction,  and 
the  continual  return  of  increases  in  value  to  circulation  would  and 
should  continually  increase  wages,  therefore,  as  these  structures 
began  to  pass  away  the  development  of  the  country  should  have 
proceeded  to  a point  where  a higher  rate  of  wages  enabled  labor  to 
get  an  increase  in  gain  for  itself  and  should  make  all  accumula- 
tions of  wealth  easier  for  the  laborer  and  slower  for  the  capitalist. 

The  second  consideration  is  the  natural  limit  of  property  of 


62 


this  description  by  which  the  value  of  this  class  of  property  is  held 
down  to  its  true  proportion  to  other  values. 

When  fixed  property  is  behind  circulating  property  in  devel- 
opment its  price  rises  above  its  cost  of  construction  and  there  is 
the  same  inducement  to  extend  such  enterprises  and  increase  the 
number  of  buildings  as  there  is  to  increase  the  output  of  commod- 
ities on  account  of  the  profit  to  be  gained. 

It  is  plain  that  there  is  a natural  limit  to  social  energy 
brought  about  by  the  limit  in  the  number  of  laborers  and  by  their 
natural  inclination  to  work  no  more  than  is  agreeable,  and  by  the 
limit  in  the  extent  of  the  forces  and  materials  at  their  command. 

This  limit  in  social  energy  fixes  the  limitation  in  the  quantity 
of  value  and  makes  necessary  the  maintenance  at  all  times  of  a bal- 
ance between  the  values  of  property  of  every  description  and  the 
products  to  which  this  value  attaches. 

Fixed  property  requires  care  and  labor  to  be  maintained  and 
it  is  a law  of  value  that  such  property  is  not  allowed  to  take  more 
value  away  in  the  shape  of  income  than  it  returns  by  the  help  it 
gives  to  the  active  forces  in  society. 

Then  it  follows  that  we  might  increase  the  quantity  of  such 
property  until  its  care  and  maintainance  became  a burden  instead 
of  a help  to  society. 

The  moment  fixed  property  gets  in  advance  of  the  entire  de- 
velopment there  will  come  a shrinkage  in  the  value  of  all  such 
property  and  this  shrinkage  soon  allows  the  poorest  and  least  fitted 
to  decay  and  pass  away  so  that  the  value  of  others  is  again  restored 
by  the  value  released  from  abandoned  property. 

In  this  way  the  rate  of  profit  finds  its  true  level  and  the  var- 
ious quantities  of  value  devoted  to  various  lines  of  development 
are  kept  in  balance,  and  thus  a balance  is  maintained  in  the  forces 
of  development,  and  in  the  circulation  of  value,  and  in  the  distri- 
bution of  wealth. 


CHAPTER  VI. 


INTERFERENCE  WITH  CIRCULATION. 

In  looking  at  the  circulation  of  money,  as  we  see  it  when 
we  look  at  the  facts,  we  get  a vivid  picture  of  the  action  of  value 
moving  vast  columns  of  supplies  and  moving  vast  armies  of  labor 
in  every  conceivable  direction. 

Without  an  appreciation  of  the  fact  that  all  these  supplies 
move  as  value  directs  them  to  move,  and  all  this  labor  is  exerted 
as  value  determines  it  shall  be  exerted,  we  could  form  no  idea  of 
social  order. 

■ Without  a knowledge  of  the  laws  of  value,  which  direct  the 
activities  of  men,  we  would  regard  society  as  a scramble  to  get  to 
a table  to  eat  and  drink  and  crowd  down  and  trample  upon  others, 
in  our  haste  for  fear  there  is  not  enough  for  all. 

But  when  we  come  to  appreciate  the  order  and  harmony  of 
social  arrangements,  and  when  we  see  how  bountiful  is  the  provis- 
ion made  for  all  of  us,  and  how  generous  is  the  feast  spread  for 
us,  we  then  begin  to  realize  that  even  the  weakest  of  mankind 
should  earn  a social  position  of  comfort  and  simple  luxury. 

In  looking  for  the  cause  of  the  unjust  and  unequal  distribu- 
tion of  wealth,  we  must  look  for  a cause  that  is  great  enough  to 
produce  the  effects. 

It  is  absurd  to  talk  about  the  robbery  of  labor  by  capitalists 
and  middlemen,  and  to  infer  that  the  source  of  low  wages  in  some 
loss  of  profits  from  the  present  earnings  of  labor. 

Such  claims  and  assertions  fail  utterly  to  account  for  the 
facts  and  amount  to  nothing,  can  be  of  no  help  to  any  solution  of 
the  problem,  and  can  not  lead  to  any  discovery,  because,  even  if  we 
admit  that  profit  is  a robbery  of  labor,  the  cause  is  utterly  inad- 
equate to  explain  the  effects. 

Countless  millions  of  dollars  have  been  withheld  from  labor 
and  kept  out  of  circulation  in  the  past  and  thousands  of  millions 
are  held  back  from  labor  every  year,  this  is  the  fact  to  he  ex- 
plained, and  such  an  explanation  as  that  labor  is  robbed  through 


64 


profits  fails  utterly  because  if  labor  could  keep  all  tfie  profits,  even 
then,  wages  would  be  far  below  the  natural  standard  of  living. 

The  utter  inability  of  all  prevailing  theories  to  furnish  any 
adequate  explanation  of  the  cause  of  unequal  distribution  of 
wealth  springs  from  false  ideas  of  the  source  of  wealth,,  and  from, 
falses  ideas  concerning  the  methods  of  accumulation  and  increase 
in  wealth. 

Value  is  the  source  of  wealth  because  wealth  only  arises  on 
account  of  the  value  of  things,  and  wealth  is  the  source  of  labor 
because  labor  is  exerted  in  order  to  secure  wealth. 

The  false  idea,  that  wealth  consists  of  things  rather  than  of 
the  value  of  theni,  is  responsible  for  much  confusion  of  thought 
on  this  subject. 

On  account  of  this  idea  reformers  seek  to  change  the  owner- 
ship of  things  instead  of  the  much  more  simple  plan  of  changing 
the  flow  of  value. 

If  we  will  only  look  at  the  facts,  that  are  on  all  sides  of  us,  we 
must  see  that  men  get  wealthy  by  manipulating  values,  by  causing 
property  to  rise  in  value  when  they  sell,  and  decline  in  value  when 
they  buy,  as  in  stock  manipulations. 

Or  to  speak  more  accurately,  since  fluctuations  in  value  are 
largely  beyond  human  control,  the  men  who  become  wealthy  do 
so  by  changes  in  the  value  of  property  which  are  constantly  in 
their  favor. 

The  wealth  of  capitalists  does  not  consist  in  tangible  and  ma- 
terial forms  of  real  property,  but  in  some  form  of  legal  instrument 
by  which  they  are  able  to  control  the  value  of  property. 

Thousands  of  millions  of  wealth  is  in  the  form  of  mortgages, 
bonds  and  stocks  by  which  the  owners  are  relieved  of  all  the  cares 
of  ownership,  but  which  enables  them  to  enjoy  all  the  benefits  of 
wealth. 

Although  the  Political  Economist  failed  to  acquire  any  defin- 
ite idea  of  value  from  modern  development,  the  capitalists  of  the 
world  learned  to  have  a very  lively  appreciation  of  value,  and  ac- 
quired a deep  knowledge  of  how  to  manipulate  it  and  have  it  flow 
to  them. 

In  the  recent  development  of  great  wealth,  and  its  rapid  con- 
centration to  a tew  owners,  there  has  come  into  existance,  a know- 
ledge of  value  as  the  essential  core  and  essence  of  wealth. 


65 


Modern  development  has  given  rise  to  a separation  of  value 
from  the  things  to  which  it  attaches. 

This  development  consists  in  the  multiplication  of  corpora- 
tions and  in  the  increase  in  the  quantity  of  bonds,  mortgages, 
stocks  and  bank  deposits,  all  of  which  are  a species  of  money,  be- 
ing the  money  of  compound  value — that  is  to  say,  they  have  an  ex- 
changeable value  based  on  fixed  property  that  makes  them  almost 
as  secure  as  money  itself. 

In  order  to  obtain  a security  for  the  value  of  bonds,  mort- 
gages, and  stocks  of  the  first  class,  the  value  of  the  property 
pledged  to  pay  them  must  be  considerably  greater  than  the  value 
of  the  securities. 

In  this  way  the  fluctuations  in  value  do  not  reach  these  cap- 
italists, and  they  can  not  suffer  a loss  until  the  owners  of  the  re- 
mainder of  the  property  are  wiped  out  by  a decline  in  its  value, 
then  they  can  buy  it  in,  wait  for  a favorable  rise  in  value  and  sell 
an  interest  large  enough  to  protect  themselves  from  a similar  loss 
in  the  future. 

It  is  important  to  note  this  fact,  and  to  note  the  growing  ten- 
dency of  wealth  in  this  direction;  because  for  this  reason  wealth 
is  much  more  unequally  distributed  than  it  may  appear. 

In  times  of  panic,  and  during  declines  in  the  total  value  of 
all  property,  this  class  of  capitalists  find  their  share  of  wealth  re- 
mains steadfast  while  the  wealth  of  the  great  middle  class  is  melt- 
ing away  in  falling  prices. 

At  such  times,  therefore,  practically  all  of  the  wealth  of  the 
country  belongs  to  the  small  but  enormously  wealthy  class,  and  at 
such  times  large  sections  of  the  middle  class,  who  own  mortgaged 
property,  drop  out  and  fall  in  with  the  poor  and  dependent  classes. 

With  a proper  conception  of  value  this  movement  of  property 
and  this  separation  of  value  from  property  is  explained. 

The  essence  of  wealth  is  value,  which  is  hut  crystalized  social 
energy,  and  as  a result  the  control  of  value  carries  with  it  the  con- 
trol of  wealth,  and  the  control  of  all  social  forces. 

Another  false  idea  associated  with  wealth  is  the  idea  that  its 
accumulation  is  a slow  process  of  saving  and  self  denial. 

According  to  this  idea  the  wealth  of  the  country  is  a result  of 
long  saving  in  the  past,  and  of  a long  sacrifice  of  pleasure,  whereas 
wealth  grows  by  leaps  and  bounds  as  new  forces  are  put  into  action. 


66 


It  is  remarkable  that  an  opinion  so  contrary  to  the  plainest 
of  facts  could  have  had  a respectable  standing  among  a thinking 
people. 

The  activity  of  societ}^,  from  which  wealth  springs,  is  a result 
of  spending,  and  saving  throttles  the  action  of  social  forces  and  of 
the  production  of  wealth,  speaking  generally. 

When  we  remember  that  wealth  springs  from  value  and  not 
from  labor,  and  remember  that  the  circulation  and  distribution  of 
wealth  is  backward  from  society  to  its  members  and  not  forward 
from  labor  to  society,  we  may  easily  discover  the  sources  of  the  ac- 
cumulation of  wealth,  and  the  causes  that  interfere  with  its  dis- 
tribution. 

As  already  explained  value  is  social  energy,  and  it  develops  in 
the  heart  of  society  from  where  it  is  distributed  to  every  organ  and 
to  all  the  tissues,  and  the  quantity  of  value  increases  as  social  en- 
ergy increases,  as  more  men  and  more  machines  are  put  to  work. 

The  paradox  in  society  to  be  explained — the  riddle  of  the 
Sphinx;  is  this  accumulation  of  surplus  value  in  enormous  quan- 
tities in  the  hands  of  a few  owners  for  investment  and  the  loss 
from  circulation  of  the  countless  millions  of  value  which  the 
masses  require  in  order  to  live  an  orderly  and  virtuous  life. 

We  must  demonstrate  that  this  enormous  accumulation  of 
value  has  no  outlet,  and  can  only  be  invested  and  reinvested  and 
thus  make  room  for  itself  by  an  increase  in  the  value  of  the  most 
desirable  property,  and  demonstrate  that  trade  and  industry  suf- 
fers because  this  same  value  is  prevented  from  flowing  in  its  nat- 
ural channels  to  circulate  and  distribute  wealth  among  the  masses. 

If  the  reader  will  keep  in  mind  the  natural  law  of  distribution 
this  demonstration  will  be  comparatively  simple,  because  we  have 
but  to  point  out  how  the  increase  in  value  is  held  back  and  pre- 
vented from  going  to  increase  wages,  and,  therefore,  piles  up  as 
useless  capital. 

The  natural  law  of  distribution  of  wealth,  as  was  explained  in 
the  last  chapter,  is  based  upon  the  appearance  of  value  at  centers 
of  trade  before  any  value  attaches  to  the  products  of  labor,  and 
upon  the  fact  that  value  is  a social  product  and  is  not  an  individ- 
ual product. 

This  appearance  of  value  in  centers  of  activity  coming  in 
quantities  that  equal  the  quantity  of  social  energy,  and  the  appear- 
ance, at  the  same  time,  of  products  give  us  to  understand  that  all 
this  value  should  in  some  manner  attach  to  these  products. 


67 


If  the  consumption  of  goods  is  to  balance  the  production  of 
goods,  if  demand  and  supply  are  to  he  in  perfect  accord,  then  the 
value  which  accumulates  in  the  market  must  all  attach  to  products 
so  that  labor  can  buy  back  its  own  production,  otherwise  the  mar- 
ket will  fill  with  unsalable  commodities,  prices  will  fall,  current 
wages  can  not  be  paid,  and  a panic  must  follow. 

The  reader  must  not  understand  that  this  total  value  must 
all  attach  to  commodities  but  it  must  attach,  also,  to  materials 
used  in  all  kinds  of  construction,  and  when  these  advance  in  value 
then  all  buildings  already  built  advance  thus  keeping  the  market 
in  perfect  equilibrium,  and  taking  up  the  surplus  value. 

Labor  and  capital  are  paid  with  value  delivered  to  them  by  the 
circulation  of  money,  and  they  can  not  be  paid,  in  our  civilization, 
in  any  other  way. 

The  value  with  which  to  pay  labor  and  capital,  which  is  also 
the  amount  due  them  from  society,  can  only  be  determined  after 
goods  come  to  the  market,  and  after  the  value  comes  to  the  same 
place;  and  distribution  can  only  be  made  after  the  goods  are  sold 
and  the  value  is  released  and  returns  to  labor  and  capital  in  the 
form  of  wages  and  profits. 

If  it  was  otherwise  and  labor  and  capital  engaged  in  produc- 
tion could  fix  the  amount  of  value  they  were  to  receive,  and  fix  the 
value  of  goods  before  they  came  to  market,  then  any  kind  of  a pro- 
duct, whether  it  was  suitable  or  not,  or  whether  it  promoted  so- 
ciety or  not,  could  have  a standing  equal  to  any  other  product,  and 
would  thus  destroy  all  order  and  all  proportion  in  development. 

The  next  point  to  consider,  after  we  consider  the  backward 
circulation  of  value,  is  the  manner  in  which  the  increases  of  value 
should  be  distributed. 

For  the  purpose  of  illustration  we  will  call  the  total  value  in 
the  United  States  as  being  worth  ninety  billion  dollars. 

This  total  value  is  a social  force  that  just  balances  the  forces 
at  work  that  build  and  maintain  this  body  politic,  and  each  of  such 
forces  at  work  in  society  contributes  its  proportional  part  to  the 
total  value. 

While  we  can  not  estimate,  with  any  degree  of  accuracy,  what 
any  particular  combination  of  forces  may  contribute  to  the  total 
value,  yet  it  will  assist  our  understanding  to  approximate  some  of 
the  contributions  to  the  total. 


68 


We  will  say,  for  example,  that  the  invention  and  application 
of  the  sewing  machine  resulted  in  an  increase  of  total  value  of  five 
hundred  million  dollars,  and  the  continued  use  of  that  invention 
sustains  such  a sum  of  value  at  all  times. 

That  any  interference,  which  would  put  half  of  this  inven- 
tion out  of  use  would  cut  this  value  one-half,  and  any  increase  in 
activity  that  would  double  the  sewing  machine  power  would  double 
this  value. 

We  may  suppose  that  the  operation  of  our  steam  railroads  add 
and  sustain  twenty  billion  dollars  of  the  total  value  of  ninety 
billions,  and  when  they  are  crippled  for  want  of  business  there  will 
be  a corresponding  decline  in  this  value. 

In  this  way  the  total  value  is  made  up,  and  by  this  activity  it 
rises  or  falls  in  quantity. 

The  law  of  redistribution  requires  that  this  total  value  shall 
divide  and  be  apportioned  among  all  the  contributing  forces  in  the 
exact  ratio  in  which  they  contribute. 

As  each  of  these  combinations  of  forces  give  rise  to  a sum  of 
value  in  proportion  to  the  energy  they  expend  for  society,  so  should 
value  return  to  them  and  be  a measure,  and  an  indication,  of  the 
part  they  play  in  the  grand  drama  of  civilization. 

As  we  examine  into  the  divisions  of  this  total  value,  so  as  to 
uncover  what  factor  in  society  is  getting  so  much  more  value  than 
it  contributes,  so  as  to  furnish  us  the  cause  for  the  lack  of  value 
in  all  other  branches,  we  come  upon  a remarkable  discovery. 

In  examining  the  various  items  of  value  that  make  up  the 
total  we  discover  that  the  value  of  lands,  lots  and  mines  absorbs 
almost  one-half  of  the  total,  being  at  least  forty  billions  out  of  a 
total  of  ninety  billions  of  dollars. 

When  we  begin  to  inquire  what  sort  of  activity  landowners 
contribute  to  the  progress  and  success  of  society,  that  they  should 
be  permitted  to  absorb  almost  one-half  of  all  the  benefits  of  civil- 
ization, and  deprive  the  vast  majority  of  people  of  a chance  to  live 
a decent  life,  we  are  astounded  to  discover  that  they  contribute 
nothing. 

And  when  we  probe  a little  deeper  into  this  question  of  land 
value,  we  are  more  than  ever  amazed  to  find  that  not  only  does 
landowning  contribute  nothing  to  the  progress  of  the  human  race 
but  that  the  value  of  land  measures  the  actual  damage  done  to 
society,  by  them  in  preventing  the  advancement  of  humanity. 


69 


Think  a moment  of  this  tremendous  truth — that  in  the  value 
of  land  we  discover  a damage  to  human  progress  that  is  measured 
by  forty  thousand  million  dollars  worth  of  social  energy  turned 
away  from  development. 

If  this  is  the  fact  surely  we  are  now  at  the  heels  of  a cause  that 
is  great  enough  to  account  for  all  the  evil  effects  we  see  around  us, 
for  the  idleness  and  misplaced  labor,  for  the  intemperance,  vice 
and  crime  which  follow,  and  for  the  degradation  of  low  wages  that 
compels  most  families  to  live  the  life  of  animals. 

That  the  value  of  land  is  a measure  of  damage  to  the  progress 
of  the  human  race  is  not  difficult  to  prove  because  the  interference 
with  progress  is  so  general  that  the  cause  must  be  almost  self- 
evident. 

To  establish  this  proof  we  ask  the  reader  to  consider  the  enor- 
mous loss  inflicted  on  the  great  mass  of  people  who  have  failed  to 
receive  their  share  of  modern  development. 

We  must  find  this  loss,  and  it  can  only  be  said  to  have  been 
found  when  we  have  uncovered  a sum  great  enough  to  account  for 
the  loss,  and  the  proof  is  conclusive  when  we  find  that  such  sum  is 
taken  out  of  circulation  to  become  a value  of  land  without  giving 
society  any  benefit  in  return. 

Land  value  presents  two  aspects,  and  the  difficulty  in  seeing 
the  damage  done  by  it  arises  wholly  on  account  of  this  condition. 

Property  in  land,  like  other  fixed  property,  has  a fixed  value 
and  an  annual  income  upon  which  its  fixed  value  depends. 

Many  economists  admit  that  this  annual  income  is  a sheer 
robbery  of  society,  but  they  are  unable  to  see  that  the  much 
greater  sum,  the  fixed  value  of  land  and  not  the  annual  income,  is 
the  measure  of  damage. 

The  proof  of  damage  will  fall — not  upon  the  income  received 
by  landowners — but  upon  the  absolute  value  of  land  which  the  an- 
nual income  enables  landowners  to  withdraw  from  circulation. 

This  is  a very  important  difference  because  the  annual  in- 
come does  not  exceed  one  and  one-half  billion  of  dollars  based  upon 
a fixed  value  of  forty  billion  of  dollars. 

This  brings  us  at  once  to  the  center  and  core  of  the  dispute 
in  the  unequal  distribution  of  wealth,  and  opens  up  the  problem 
in  its  full  significance. 

In  Feudal  times  as  soon  as  a peaceful  commerce  developed 


70 


upon  the  principal  rivers  of  Europe,  the  Feudal  Barons,  who 
claimed  to  own  as  much  of  these  streams  as  was  included  in  their 
estates,  fastened  chains  across  the  rivers  so  as  to  halt  this  com- 
merce at  their  castles  and  compel  it  to  pay  tribute  for  the  use  of 
the  rivers. 

The  Barons  drunk  demanded  and  received  more  tax  than 
the  Barons  sober  and  the  effect  of  this  system  of  taxation  is  fa- 
miliar to  all  readers  of  history. 

The  commerce  that  was  in  progress  of  development  on  these 
streams,  and  the  dependent  industries  that  were  building  towns 
and  cities  to  supjdy  this  trade,  was  stopped  short  in  its  career,  and 
as  the  trade  was  destroyed  the  industry  of  the  people  was  destroyed 
also. 

In  this  illustration  the  damage  done  by  the  Feudal  Barons  is 
not  to  be  measured  by  the  tribute  levied  upon  the  commerce  of  the 
rivers,  but  by  the  value  of  the  trade  and  industry  destroyed. 

On  one  of  the  corners  of  State  Street  in  the  City  of  Chicago 
is  an  old  five  story  building  worth  not  to  exceed  sixty  thousand  dol- 
lars; the  merchant  who  uses  this  location  and  building  pays  the 
owner  a rent  of  sixty-five  thousand  dollars  per  year.  The  owner 
of  this  property  need  not  go  to  the  trouble  and  expense  of  inter- 
fering with  the  rushing  traffic  of  this  street  to  collect  his  tribute 
from  its  trade  because  the  merchant  can  afford  to  give  the  public 
better  facilities,  a larger  selection,  and  a lower  price  at  this  loca- 
tion than  at  another  where  the  traffic  is  not  nearly  so  great. 

In  this  illustration  the  owner  of  the  building  and  the  location 
is  a capitalist  because  he  furnishes  a building,  and  a landowner  be- 
cause he  controls  the  location. 

The  sixty-five  thousand  dollars  of  rent  per  year  includes  two 
items,  one  is  the  profit  to  capital  for  the  use  of  the  building  and 
the  other  is  profit  to  landowner  for  the  use  of  the  location. 

Suppose  we  allow  the  capitalist  a profit  on  his  capital  of 
twenty  per  cent,  per  year  which  will  produce  twelve  thousand  dol- 
lars a year  for  the  use  of  the  building  worth  sixty  thousand  dollars. 

To  subtract  twelve  thousand  dollars  from  sixty-five  thousand 
dollars  rent  leaves  a profit  to  the  landowner  of  fifty-three  thous- 
and dollars  a year  for  the  location. 

This  income  of  fifty-three  thousand  dollars  a year  will  sustain 
a fixed  land  value  of  not  less  than  a million  dollars,  for  the  same 
reason  that  the  twelve  thousand  dollars  a year  sustains  a building 
value  of  sixty  thousand  dollars. 


71 


This  brings  ns  now  to  the  heart  of  the  question  and  we  have  to 
demonstrate  that  the  damage  to  society,  by  this  system  of  feudal- 
ism, is  to  be  measured  by  the  million  dollars  of  land  value,  and  not 
by  the  fifty-three  thousand  dollars  of  annual  income. 

We  will  first  examine  the  source  of  the  annual  income  which 
is  paid  for  the  use  of  this  'exceptional  location. 

Here  we  discover  that  it  would  he  quite  difficult,  if  not  impos- 
sible to  prove  any  damage  to  society  because  of  this  payment. 

The  source  of  this  fifty-three  thousand  dollars  is  in  time  saved 
by  the  use  of  this  location  over  any  other  location  in  Chicago. 

Although  the  land  owner  may  have  no  claim  on  this  saving  of 
time  yet  the  occupying  merchant  does  furnish  the  facilities  by 
which  the  public  saves  time  enough  to  counterbalance  the  rent, 
and  the  merchant  may  be  considered  to  be  an  agent  of  the  land- 
owner  according  to  the  terms  of  theiy  contract.  . 

This  favorable  location  is  an  effect  of  building  the  City  of 
Chicago  around  the  center  of  trade,  and  the  annual  rents  result 
from  a gain  to  the  public  on  account  of  being  able  to  trade  to 
greater  advantage  at  these  favorable  points. 

Thus  if  the  landowner  did  not  himself  receive  this  sum  of 
fifty-three  thousand  dollars  per  year  it  v/ould  swell  the  profits  of 
the  merchant,  because  prices  are  determined  by  world  wide  consid- 
erations, and  the  public  does  not  suffer  on  account  of  this  rent. 

When,  on  the  other  hand,  we  come  to  examine  the  source  of 
the  million  dollars  of  land  value,  which  the  owner  may  receive  at 
any  time  from  the  sale  of  this  property,  we  come  upon  an  entirely 
new  and  original  proposition. 

The  source  of  this  million  dollars  of  value  is  the  industry  and 
activity  of  society  to  which  the  landowner  is  not  required  to  con- 
tribute one  cent  for  the  million  dollars  he  may  take  away. 

It  follows  as  certainly  as  two  and  two  are  four  that  this  sum 
of  one  million  dollars  in  value,  and  the  forty  thousand  other  mil- 
lion dollars  of  like  value,  is  taken  out  of  circulation  without  any 
return  to  society. 

In  order  to  see  this  problem  more  clearly  we  must  remember 
that  this  location,  now  worth  a million  dollars,  has  increased  in 
value  from  nothing  to  a million  dollars  without  any  change  in  the 
property  itself,  differing  in  this  particular  from  the  value  of  all 
other  property. 


72 


This  increase  in  land  value  came  to  these  fortunate  individ- 
uals as  a result  of  the  growth  and  wealth  of  Chicago  which  was  a 
result  of  a great  concentration  of  social  energy  within  a compara- 
tively small  space. 

The  cause  of  the  development  of  the  City  of  Chicago  was  the 
meeting  at  that  point  of  many  lines  of  trade,  the  economy  of 
forces  and  the  saving  in  time  over  the  same  forces  expended  at  any 
similar  place  within  a radius  of  many  miles. 

This  saving  and  economy,  in  the  expenditure  of  social  energy, 
gave  rise  to  large  profits  to  capital  and  higher  wages  to  labor  at 
Chicago  than  at  other  places. 

Thus  labor  and  capital  were  attracted  to  that  location  on  ac- 
count of  its  advantages  in  the  circulation  of  value  and  proceeded 
to  build  the  city. 

The  owners  of  the  land  upon  which  Chicago  is  built  held  the 
power  in  their  hands  to  drive  away  all  this  labor  and  capital  by  de- 
manding such  a price  for  their  land,  as  to  force  wages  and  profits 
below  the  general  level. 

In  the  beginning  of  the  development  of  Chicago  such  power 
was  not  realized  by  the  landowners,  and  as  but  little  value  was  in 
existance  at  that  place  land  was  almost  worthless. 

There  was  thus  nothing  in  the  way  of  a start  being  made  in 
building  this  city  and  to  encourage  labor  and  capital  to  concentrate 
at  that  point. 

But  as  labor  and  capital  began  to  build,  and  manufacture,  and 
develop  trade,  there  was  a great  increase  in  the  quantity  of  value 
in  circulation. 

Centers  were  soon  established  where  profits  were  greater  than 
the  average  and  the  competition  for  these  locations  began  to  bid 
up  the  value  of  land,  and  bring  a new  form  of  investment  into  the 
market. 

As  the  total  value  increased  the  power  of  landowners  increased 
in  greater  ratio  and  they  demanded,  and  received,  a constantly  in- 
creasing share  of  the  wealth  of  the  community. 

This  demand  for  increasing  prices  of  land  withdrew  increasing 
sums  from  circulation,  and  it  was  only  as  long  as  increase  in  popu- 
lation and  increase  in  production,  kept  pace  with  these  demands 
that  the  growth  of  the  city  was  not  interrupted  by  panics. 

But  these  demands  soon  outrun  the  power  of  satisfying  them, 
and  as  land  value  would  advance  investment  would  leave  other 


73 


channels  and  buy  land^,  and  a boom  in  realestate  would  result  which 
would  be  followed  by  a panic,  because  the  value  withdrawn  from 
circulation  left  business  without  the  means  of  life. 

The  panic  and  low  prices  destroyed  all  legitimate  profits  in 
trading  and  manufacturing,  and  brought  all  industry  to  a stand- 
still, and  as  all  incomes  failed,  including  the  incomes  of  landown- 
ers, a great  shrinkage  in  all  values  followed. 

In  the  hard  times  and  low  prices,  following  a boom  in  real 
estate,  land  w^as  forced  to  a lower  price,  and  as  industry  started  up 
again  the  value  thus  set  free  could  attach  to  goods  and  was  suffi- 
cient to  allow  living  wages  and  profits  and  a new  season  of  prosper- 
ity followed  but  with  production  on  a lower  margin  than  before. 

In  the  settlement  and  adjustment  of  prices,  which  follows  a 
panic,  the  land  wmuld  retain  as  much  of  the  value  it  had  taken  as 
labor  and  capital  could  be  compelled  to  give  up,  and  this  reduced 
the  profits  of  capital  and  wages  of  labor  to  the  lowest  standard  of 
living. 

For  this  reason  the  wages  of  common  labor,  being  subject  to 
the  hardest  competition,  could  never  advance  with  the  increase 
in  wealth  of  society  and  rise  to  the  higher  standard  of  living  pro- 
vided by  a newer  civilization. 

The  natural  law  of  the  distribution  of  wealth  requires  that 
all  the  increases  of  value,  arising  from  increasing  powers,  must  be 
distributed  and  paid  out  in  wages  in  order  to  supply  value  to 
the  market  with  which  to  buy  back  the  products,  and  thus  relieve 
the  market  of  goods. 

The  value  of  land  is  an  interference  with  this  law,  and  takes 
up  this  value  as  fast  as  it  develops,  and  prevents  this  increase  of 
the  wage  fund. 

The  new  powers  of  production  soon  fill  the  market  with  goods 
for  which  no  buyers  are  to  be  had,  because  the  value  with  which 
to  buy  has  never  been  distributed  to  them. 

The  method  by  which  land  value  increases  at  the  expense  of 
wages  is  made  clear  by  the  law  of  the  circulation  of  value. 

The  quantity  of  value  always  depends  upon  the  quantity  of 
social  energy,  being  expended  at  the  time,  in  carrying  on  the  work 
of  society. 

This  value  appears  in  the  market  before  products  appear  and 
attaches  to  money ; and  money  measures  out  the  value  to  products 


74 


as  fast  as  they  appear,  but  when  part  of  this  value  is  diverted  and 
absorbed  then  money  can  only  measure  out  the  value  provided  for 
commodities,  and  prices  fall  and  goods  fail  to  find  buyers. 

The  quantity  of  value  in  the  market,  coming  there  as  a re- 
sult of  production,  always  exceeds  the  cost  of  production,  leaving 
a wide  margin  for  profit  to  employers  of  labor  and  merchants. 

The  entire  problem  of  distribution  hinges  upon  the  invest- 
ment of  these  profits,  and  when  they  are  used  to  increase  land 
value  the  redistribution  fails,  and  wealth  concentrates. 

The  investment  of  profits  should  always  be  made  in  new  lines 
of  development,  or  to  increase  old  enterprises,  and  when  this  is 
done  the  power  of  consumption  in  the  market  is  always  ahead  of 
the  power  of  production  by  the  amount  of  the  profit. 

New  enterprises  called  into  existance  by  the  investment  of 
profits,  and  the  increase  in  old  established  lines,  brings  new  social 
energy  into  play  and  again  increases  the  value  available  in  the 
market. 

The  time  comes  rapidly,  in  such  cases,  when  wages  must  be- 
gin to  advance  to  take  up  this  surplus  value,  and  expand  the  mar- 
ket to  the  widest  extent,  thus  making  an  outlet  for  products  equal 
at  least  to  our  powers  of  production. 

The  interference  with  this  circulation  of  value  arises  the 
moment  some  property  offers  an  investment  for  profits  that  will 
not  employ  labor,  or  increase  development,  or  bring  new  enter- 
prises into  play. 

Property  in  land  offered  the  most  desirable  form  of  invest- 
ment to  be  found  in  the  market,  and  this  property  caused  a con- 
tinual interference  which  was  only  checked  by  repeated  panics. 

The  annual  rent  for  property  in  land  was  the  most  secure 
basis  of  income  in  the  market,  and  on  account  of  such  security 
every  dollar  of  such  rent  would  put  twenty  dollars  of  investment 
value  into  land  before  a dollar  income  from  capital  would  call 
out  ten  dollars  for  investment  in  new  structures. 

Land  does  thus  capitalize  on  a much  lower  basis  of  profit  and 
absorbs  value  much  faster  than  the  capital  employed  in  produc- 
tion or  trade. 

The  value  of  land  must  be  regarded  as  a value  held  out  of 
circulation,  and  regarded  as  being  the  efficient  cause  of  all  the 
evils  that  attend  our  unequal  and  unjust  distribution  of  wealth. 


75 


This  value  is  a permanent  and  persistant  interference  with 
the  progress  of  societ}^,  doing  evil,  not  only  by  the  vast  sums  it 
takes  away  from  mankind,  but  doing  a double  damage  by  prevent- 
ing the  progress  that  would  result  from  the  use  of  this  enormous 
value  in  development. 

It  may  he  worth  our  time  to  inquire  into  another  form  of  un- 
earned value,  namely,  what  is  known  as  water  in  the  valuation  of 
other  forms  of  property,  meaning  a value  greatly  in  excess  of  the 
cost  of  reproduction. 

Without  doubt  the  profits  in  many  enterprises  that  pay  div- 
idends upon  issuses  of  watered  securities  supplies  a fund  similar 
to  value  in  land,  and  holds  such  value  out  of  circulation,  provided, 
that  if  such  values  were  set  free  land  would  not  pick  them  up  and 
add  them  to  its  own. 

But  when  we  examine  this  question  closely  we  will  find  that 
these  issues  of  water  securities  are  hut  an  effect  of  the  competi- 
tion with  land  value,  and  of  the  low  rate  of  profit  and  of  the  sur- 
plus of  capital  brought  into  existance  by  it. 

The  value  of  land  being  held  out  from  its  natural  channels 
attempts  to  get  into  circulation  by  competition. 

As  this  value  is  loaned  out  it  increases  the  output  of  factor- 
ies by  increasing  their  number,  and  increases  the  number  of  mer- 
chants, thus  dividing  profits  into  low  rates. 

Wages  not  having  been  allowed  to  advance  to  their  natural 
level,  on  account  of  this  loss  of  value,  furnish  the  explanation  of 
the  large  earnings  of  railways,  and  other  monopolies,  by  which 
they  support  their  great  issues  of  securities. 

If  land  value  was  removed,  as  an  interference,  the  immediate 
increase  in  wages  and  the  consequent  decline  in  quantity  of  cap- 
ital would  at  once  correct  the  evil  of  overcapitalization. 


CHAPTER  VII. 


CORRECTION  OF  CIRCULATION. 

The  remedy  for  the  unequal  distribution  of  wealth  must  be 
found  in  a change  in  the  currents  of  value  for  the  reason  that 
value  is  the  cause  of  the  wealth  which  is  distributed  by  the  flow  of 
this  force. 

The  value  taken  out  of  circulation,  to  become  a value  of  land, 
must  be  restored  to  trade  and  industry. 

The  problem  of  correcting  the  circulation  of  value  is  a very 
simple  one  and  consists  only  of  taking  the  annual  profits,  received 
for  the  use  of  locations  of  all  kinds,  for  public  purposes  by  a new 
system  of  taxation. 

This  system  is  well  and  most  favorably  known  as  the  Single 
Tax,  but  its  effects  upon  the  distribution  of  wealth  are  not  well 
known  or  even  appreciated. 

As  a method  of  taxation  the  Single  Tax  has  been  so  ably  and 
effectually  presented  by  Mr.  Henry  George  as  to  silence  all  opposi- 
tion. 

It  is  universally  admitted  among  students  that  the  single  tax 
should  supercede  our  present  system  on  account  of  its  merits  as  a 
tax  measure  alone,  if  it  had  no  greater  virtue. 

But  we  expect  to  demonstrate  that  the  effect  of  this  system 
will  change  the  current  of  at  least  forty  billion  dollars’  worth  of 
value,  in  the  United  States  alone,  and  solve  all  of  our  great  indus- 
trial problems. 

In  the  days  before  railroads  were  built  when  communication 
was  had  with  ox  teams,  and  springless  wagons  on  wooden  axles, 
it  would  indeed  have  been  difficult  to  point  out  the  advantages  of 
modern  methods,  although  we  easily  appreciate  them  now. 

At  such  times  it  would  have  been  a hard  task  to  prove  to  trav- 
elers that  a much  less  expenditure  of  force  on  a steel  track  could 
carry  ten  times  the  load,  a greater  distance  in  an  hour,  than  was 
being  done  in  a day. 

We  meet  such  a problem  in  trying  to  explain  the  benefits  of  a 


77 


just  and  equitable  distribution  of  wealth  to  a public  who  are  strug- 
gling along  hub  deep  in  the  mud^,  walking  half  the  time,  helping 
to  push  the  load,  swearing  and  cursing  the  team,  the  road,  the 
driver,  God  and  the  Devil. 

The  distribution  of  wealth  is  admittedly  so  bad  that  no  illus- 
tration can  add  to  our  knowledge  of  it,  but  roads  were  admittedly 
bad  a long  time  before  people  roused  themselves  to  better  condi- 
tions. 

Every  one  is  willing  to  admit  that  roads  are  abominable  and 
growing  worse,  that  they  interfere  with  the  happiness  and  wealth 
and  progress  of  the  community,  but  when  they  contemplate  the 
cost  of  a change  the  heart  fails  and  they  submit  until  conditions 
become  intolerable. 

Just  as  opposition  has  been  encountered  in  improvements  for 
the  general  benefit  in  times  past  because  of  the  expense,  and  the 
fear  of  property-owners  that  they  may  have  it  to  pay,  so  may  we 
expect  opposition  now. 

But  as  improved  methods  of  taxation  in  cities  has  dispelled 
opposition  by  placing  the  burden  of  cost  upon  the  property  bene- 
fited, so  may  we  expect  opposition  to  fade  away  as  the  effects  of 
the  single  tax  and  its  general  benefits  are  appreciated. 

When  a new  railroad  is  planned  to  connect  scattered  com- 
munities with  some  important  commercial  center  the  investment 
is  calculated  on  a basis  of  existing  conditions,  and  upon  the  exist- 
ing traffic  to  be  moved. 

The  secondary  effects  of  railroad  construction,  however,  have 
greatly  exceeded  the  estimated  and  primary  effects. 

Not  only  was  the  market  increased  beyond  all  expectation, 
and  the  tributary  territory  relieved  of  its  congestion  of  products, 
but  a new  circulation  of  wealth  came  into  existence,  the  benefits  of 
which  were  far  reaching. 

The  effect  of  an  important  railroad  is  to  open  up  new  lines  of 
industry  in  every  direction,  causing  new  towns  to  be  built  and 
old  ones  to  take  on  new  life  and  grow  into  cities. 

Factories  are  added  to  factories  and  stores  of  new  merchan- 
dise to  stores,  and  all  trade  expands  beyond  the  fondest  expecta- 
tion. 

The  problem  confronting  society,  which  is  made  plain  by  the 
congestion  of  wealth  among  a few  people  in  great  centers  of  trade 
and  the  impoverishment  of  the  great  masses  of  mankind,  is  not 
unlike  the  problem  presented  to  railroad  builders. 


78 


When  we  consider,  therefore,  the  congestion  of  value  to  be  re- 
distributed as  a primary  proposition,  we  must  also  take  into  ac- 
count the  secondary  effects  which  will  greatly  exceed  the  expected 
benefits. 

We  may  only  be  able  to  explain  how  the  idle  and  surplus  value 
seeking  investment  may  be  restored  to  its  natural  channels,  and 
thereby  cause  a wonderful  revival  of  industry  and  a great  increase 
in  wages. 

But  the  much  greater  results  which  will  follow  this  primary 
adjustment,  by  a higher  life,  a better  religion  and  morality,  by  a 
new  faith  and  a higher  conception  of  God,  may  not  be  as  clear  to 
the  student. 

Our  problem  reduces  itself  to  a single  primary  proposition 
and  this  is  about  the  disposition  of  the  present  value  of  land  after 
the  profits  of  ownership  have  been  taken  away. 

It  is  admitted  on  all  sides  that  if  the  annual  income  now  re- 
ceived by  landlords  for  the  use  of  favorable  locations  is  taken  by 
the  government  for  taxes  then  the  fixed  value  of  land  will  dis- 
appear. 

The  reason  of  this  is  very  simple  and  is  found  in  the  fact  that 
to  deprive  income  property  of  its  revenue  is  to  destroy  its  value 
or  drive  it  away. 

The  proposition  we  seek  to  establish  is  that  the  value  of  land 
is  a part  of  the  general  value  of  society  and  does  not  depend  upon 
any  inherent  quality  of  land  or  location  or  mineral,  but  does  de- 
pend upon  the  activity  of  the  forces  of  industry. 

The  result,  then,  from  this  standpoint,  granting  that  in- 
dustry would  not  be  checked  by  this  system  of  taxation,  must  be 
that  the  total  quantity  of  value  could  remain  unchanged  and  the 
present  value  of  land  must  seek  its  natural  channels  of  circula- 
tion. 

The  complete  demonstration  of  this  problem  is  found  in  the 
laws  of  value  already  considered. 

But  for  fear  the  reader  may  believe  the  subject-matter  is 
beyond  his  grasp,  and  he  is  unable  to  conceive  of  value  acting  as  an 
objective  power,  there  is  yet  another  method  by  which  he  may  be 
convinced  of  the  truth. 

Nature  has  a plan,  in  all  of  her  laws,  to  convince  the  under- 
standing against  the  will,  and  against  settled  beliefs,  by  the  fact 


79 


that  when  the  mind  once  entertains  a great  truth  it  is  driven  to 
accept  it  because  any  contrary  opinion  is  beyond  power  of  con- 
ception. 

In  the  case  under  consideration,  when  the  truth  is  once 
plainly  stated  the  mind  will  perceive  that  anything  to  the  con- 
trary becomes  impossible. 

Let  us  examine  this  proposition,  then,  from  the  standpoint  of 
an  axiom  and  see  if  we  can  imagine  any  other  result  than  the  one 
claimed. 

It  is  admitted  that  the  forty  billion  dollars  of  value  will  leave 
property  in  land,  and  now  we  ask  where  will  it  go  ? What  will 
become  of  it  ? 

Are  we  to  be  told  and  expected  to  believe  that  the  first  result 
of  the  single  tax  will  be  to  reduce  the  value  of  all  property  in  the 
United  States  from  a total  of  ninety  billion  dollars'  worth  to  a 
total  of  fifty  billion,  and  it  will  entail  a loss  of  so  much  wealth  to 
a single  class  of  the  country? 

It  will  not  answer  to  say  that  land  is  not  wealth  and  should 
have  no  value  because  we  are  not  speaking  of  land,  but  of  the 
value  of  land,  and  the  present  value  of  land  is  wealth,  all  argument 
to  the  contrary  failing  to  change  the  self-evident  fact. 

This,  clearly  reduces  any  other  proposition  opposed  to  the  one 
here  submitted  to  an  utter  absurdity  and  to  leave  no  room  for  com- 
ment or  argument. 

Then  we  are  compelled  to  admit  that  when  we  take  away  the 
annual  income  that  now  supports  the  value  of  land  we  set  this 
value  free  and  do  not  destroy  it. 

We  now  come  to  the  important  question  of  what  becomes  of 
this  free  value  driven  from  property  in  land?  Where  does  it  go 
and  how  does  it  get  there? 

Again,  we  will  find  that  the  laws  of  Nature  leave  no  room  for 
more  than  one  opinion  on  this  subject,  and  we  will  be  forced  to  ad- 
mit that  this  value  set  free  must  attach  to  the  remaining  property 
and  increase  its  price  according  to  the  same  laws  of  distribution 
by  which  the  present  value  of  such  property  has  been  apportioned. 

Consider  again  how  simple  is  this  great  truth  and  how  surely 
the  mind  must  refuse  to  entertain  any  contrary  opinion. 

We  have  in  our  problem  a total  quantity  of  value  estimated 
for  the  United  States  as  ninety  billion  dollars^  worth  and  we  admit 
this  value  is  independent  of  the  property  to  which  it  now  attaches. 


80 


We  admit,  also,  that  the  activity  of  social  forces,  upon  which 
this  value  depends,  will  not  be  impaired  by  the  proposed  change  in 
methods  of  taxation,  and,  hence,  it  follows  the  total  value  will  not 
decline. 

Having,  therefore,  a constant  sum  of  value,  which  we  will  not 
diminish  in  changing  the  currents  of  distribution,  and,  also,  a 
supply  of  property  to  which  this  value  now  attaches,  we  decide  to 
withdraw  one  class  of  property  containing  value  to  the  amount  of 
forty  billion  dollars  from  the  present  market. 

We  have  thus  decreased  the  supply  of  property  almost  one- 
half  without  in  any  way  impairing  the  demand,  and  we  may  be 
sure  what  now  constitutes  a demand  for  land  will  then  become  a 
demand  for  other  property  and  in  this  manner  transfer  the  pres- 
ent value  of  land  to  other  property. 

We  now  come  to  consider  the  method  by  which  this  change 
occurs  and  we  encounter  the  mystery  of  measurement  by  society 
at  large. 

Consider  the  egg  market  as  an  illustration.  We  have  in  this 
example  a variable  supply  operating  against  a fixed  value  just  as 
we  have  in  our  problem  of  land  value. 

During  the  months  when  eggs  come  into  the  market  in  large 
quantities  the  value  being  limited,  results  in  a fall  in  price,  and  as 
the  season  closes  and  the  supply  begins  to  diminish  the  same  value 
covers  a smaller  supply  at  an  increasing  price. 

In  this  illustration  we  have  a definite  quantity  of  value  that 
keeps  our  market  supplied  with  eggs,  and  when  the  supply  is  low 
this  value  divides  up  according  to  this  supply  resulting  in  a high 
price  and  gives  encouragement  to  increase  the  supply,  and  the 
price  falls  as  the  supply  grows. 

This  is  true  of  every  price  in  the  market  and  therefore  the  • 
same  law  applies  to  the  value  of  land  which,  being  set  free,  will 
increase  every  other  fund,  and  give  us  more  value  in  every  line, 
and  the  value  that  was  taken  from  the  market  will  again  be  re- 
stored to  the  market. 

We  may  claim,  with  the  assurance  of  having  the  truth  on  our 
side,  that  each  particular  item  in  our  social  economy,  such  as 
eggs,  meat  and  clothes,  etc.,  etc.,  will  each  receive  their  share  of 
this  land  value  when  it  has  been  restored  to  the  general  fund  of 
society. 


81 


The  interference  of  property  in  land  by  which  it  was  able  to 
acquire  its  present  value  did  not  bear  as  heavily  on  some  classes  of 
property  as  upon  others  better  able  to  resist  competition. 

The  classes  of  property  least  able  to  resist  a loss  to  property 
in  land  will  gain  most  when  this  value  is  restored  to  the  market. 

In  the  redistribution  of  this  land  value  the  first  general  effect 
will  be  an  evening  up  of  all  values  to  the  general  level  provided  by 
natural  laws  ,and  when  this  is  accomplished  the  value  that  may  re- 
main will  go  to  every  class  of  property  according  to  the  proportion 
that  each  sustains  in  the  entire  fund. 

This  natural  level  to  which  all  value  now  below  it  must  first 
be  raised  is  the  level  of  monopoly,  and  present  monopoly  prices 
will  not  advance  until  after  every  other  competitive  price  has 
come  up  to  the  monopoly  level. 

The  products  of  common  labor  will  therefore  make  the  great- 
est gain  because  common  labor  acted  as  a buffer  against  which 
competition  expended  its  greatest  force,  and  other  labor  did  not 
suffer  loss  until  common  labor  suffered  all  it  could  bear. 

We  are  now  at  the  point  from  which  we  may  go  back  to  the 
law  of  distribution  and  trace  this  forty  billions  of  value  according 
to  this  law. 

It  was  demonstrated  that  the  activity  of  social  forces,  divid- 
ing into  thousands  of  occupations,  gave  rise  to  a sum  of  value 
which  is  in  the  control  of  society,  and  which  apnears  first  in  the 
market  as  the  retail  price  of  goods  and  goes  hack  to  compensate 
the  social  forces  producing  the  goods. 

The  activity  of  these  social  forces  gave  rise,  also,  to  a certain 
quantity  of  products  which  were  sent  to  the  market  in  a constant 
stream  to  find  their  value. 

It  is  the  chief  function  of  money  to  take  up  value  from  the 
general  fund  of  society  and  measure  it  out  to  this  stream  of  com- 
modities as  the  laws  of  evolution  prescribe. 

Money  acts  as  a measure  that  takes  up  its  measure  of  value, 
no  more  and  no  less,  and  when  full  of  value  pours  it  out  to  any- 
thing for  which  it  may  be  exchanged.  In  this  manner  the  value 
free  to  circulate  is  distributed  to  goods  as  they  come  to  market, 
and  from  this  start  the  same  value  is  distributed  to  pay  profits  and 
wages.  The  point  now  to  consider  is  that  the  wages  of  labor  and 
the  cost  of  production  is  less  than  the  value  of  the  product  in  the 


82 


market.  The  reason  for  this  condition  is  found  in  the  fact  that 
wages  are  based  on  common  labor  and  only  advance  as  co-opera- 
tion replaces  individual  efforts^  and  as  new  methods  and  machin- 
ery are  put  to  use.  Labor  is  paid  only  what  it  may  earn  working 
independently,  because  some  such  workmen  are  outside  and  ever 
ready  to  take  the  places  of  other  workmen,  and,  therefore,  wages 
do  not  rise  in  proportion  to  their  gain  in  power  from  the  use  of 
tools  and  machinery.  Wages  originally,  before  employers  came 
into  the  market  and  when  each  man  was  an  individual  worker, 
were  only  sufficient  to  support  a simple  life.  Wages  could  only 
advance  as  productive  power  increased  and  then  only  by  the  cor- 
responding increase  in  value  returning  to  labor.  So  long  as  some 
workmen  were  not  taken  into  new  development  their  competition 
lield  wages  down  and  the  gains  in  productive  power  became  the 
l)rofits  of  employers  and  traders. 

The  advance  in  wages,  therefore,  must  come  from  profits, 
because  as  the  power  of  labor  increased  the  effect  was  to  increase 
the  total  and  general  value,  and  since  this  value  could  but  in- 
crease the  prices  of  products  its  effect  was  to  enlarge  profits.  It 
is  a law  of  distribution  that  before  wages  may  rise  generally  these 
profits  must  be  so  general  and  in  such  quantity,  and  be  so  distrib- 
uted and  used  for  new  development,  as  to  call  all  labor  into  the 
market  and  do  away  with  the  competition  of  the  unemployed. 

Hence,  so  long  as  there  is  a margin  of  labor  at  cheap  employ- 
ments, competing  for  value  in  order  to  live,  profits  refuse  to  dis- 
tribute themselves  in  higher  wages  and  remain  to  augment  the 
wealth  of  employers  and  merchants. 

It  is  clear  that  although  five  workmen  who  co-operate  will 
produce  a greater  result  than  five  workmen  at  the  same  task  work- 
ing independently,  it  does  not  follow  that  they  will  necessarily  be 
paid  more  wages  for  the  greater  product. 

This  extra  payment  of  wages  depends  upon  the  redistribution 
of  profits,  and  when  we  remember  how  the  value  of  land  is  a grave- 
yard for  profits,  we  find  why  wages  advance  with  such  difficulty 
above  the  lowest  levels  at  which  a man  will  work  in  order  to  live. 

Land  value  is  made  up  of  profits  that  should  have  been  redis- 
tributed from  the  beginning  of  improvements  in  production. 

In  order  to  realize  what  the  effect  will  be  from  the  redistribu- 
tion of  such  an  enormous  sum  of  profits,  now,  and  in  bulk,  by  a 


83 


new  system  of  taxation,  we  must  consider  what  the  result  would 
have  been,  at  this  time,  had  these  profits  been  regularly  distributed 
instead  of  becoming  a value  of  land.  To  do  this  we  must  attempt 
to  distribute  this  value  now  by  the  same  channels  it  would  have 
been  distributed  and  to  estimate  the  increase  of  results. 

We  know  that  the  value  we  have  in  circulation  goes  out  to  buy 
material  and  build  all  manner  of  structures  and  thus  keep  labor 
and  machinery  employed.  AVe  need,  then,  to  estimate  how  much 
greater  would  have  been  the  development,  how  much  higher  the 
wages  and  how  much  happier  and  better  the  people  had  the  pres- 
ent value  of  land  been  free  to  circulate  as  other  value  now  circu- 
lates. AA^e  may  be  reasonably  sure  that,  in  such  an  event,  we  would 
have  had  at  least  double  the  number  and  value  of  improvements 
and  not  less  than  three  times  as  much  paid  out  in  wages  as  now. 

AA^e  have  already  demonstrated  that  the  mind  can  only  admit 
of  one  conclusion  as  a result  of  driving  value  away  from  land  by 
taxation  and  the  property  remaining  must  rapidly  gain  all  the 
value  land  loses,  except  money,  which  can  only  fill  up  its  measure 
from  the  general  fund. 

The  first  effect  of  the  single  tax,  speaking  generally,  would 
be  to  at  least  double  the  value  of  all  buildings,  of  all  stocks  of 
goods,  and  of  all  manner  of  supplies  in  the  country.  The  question 
will  now  arise  as  to  how  it  will  be  possible  to  dispose  of  stocks  of 
goods  and  property  at  such  a great  increase  in  price  to  a public 
who  can  not  buy  the  present  stocks  at  present  prices.  To  answer 
this  question  there  is,  as  usual,  two  points  to  consider.  The  first 
is  that  there  has  been  no  increase  in  price  where  the  whole  market 
is  considered,  but  that  land  has  been  cheapened  by  what  other 
things  have  gained  in  price. 

But  there  remains  the  important  point  that  commodities  in 
general  will  be  very  much  higher  while  apparently  the  purchasing- 
power  of  the  mass  of  the  people  remains  practically  the  same. 

The  increase  in  value  we  are  considering  must  be  measured 
out  to  goods  by  the  use  of  money,  and  goods  will  not  jump  to  the 
new  price  in  an  instant.  The  path  of  circulation  for  the  distribu- 
tion of  the  present  value  of  land  is  as  follows : AVhen  this  value  is 
set  free  it  will  become  a part  of  the  general  fund  of  society  first, 
and  from  there  it  will  next  increase  the  value  of  structures  of 
every  description,  and  this  increase  will  be  immediately  communi- 
cated to  materials  used  in  construction  and  then  other  commod- 


84 


ities  will  gain  the  new  price  from  which  wages  must  get  the  addi- 
tional value.  Blit  we  find  that  it  would  not  he  possible  to  sell 
goods  at  a higher  price  than  the  one  now  prevailing  without  a mar- 
ket for  consumption  strong  enough  in  value  to  buy  the  goods.  We 
can  not  get  away  from  the  fact  that  higher  priced  goods  can  not  be 
sold  without  a previous  increase  in  wages  so  as  to  buy  the  goods, 
and  we  know  that  wages  can  not  advance  except  they  do  so  from 
the  value  distributed  by  higher  priced  commodities.  Here,  indeed, 
is  a dilemma — a problem  without  an  apparent  solution,  and  we 
seem  to  have  run  our  argument  against  a stone  wall,  and  to  expect 
the  reader  to  believe  that  merchants  will  buy  goods  at  a high  price 
only  to  sell  them  at  a certain  loss.  The  only  solution  to  this  per- 
plexing problem  seems  to  he  that  the  value  with  which  to  increase 
the  purchasing  power  of  the  market  so  as  to  admit  higher  priced 
goods  is  loaned  or  advanced  from  some  source  ahead  of  production 
or  simultaneously  with  it.  We  know  from  experience  with  panics 
that  there  is  a simultaneous  adjustment  of  higher  prices  and 
greater  purchasing  power  by  which  prosperity  returns  into  the 
market. 

The  prosperous  times,  following  a panic,  come  in  this  order: 
There  is  first  an  advance  in  prices  of  leading  commodities,  coming 
in  impulses  a little  at  a time,  from  the  value  set  free  by  the  de- 
cline in  value  of  land  during  the  close  of  hard  times.  This  advance 
in  prices  leads  merchants  and  others  to  give  buying  orders  in  ad- 
vance of  the  consuming  power  of  the  market.  The  merchants 
have  gained  a profit  from  this  advance  in  prices  on  the  stocks  of 
goods  on  hand,  and  they  do  not  increase  their  liabilities  by  giv- 
ing orders  to  this  amount.  From  these  advance  orders  follows  an 
increase  in  production  all  along  the  line  of  higher  priced  goods, 
which  calls  out  labor,  puts  mills  and  factories  in  operation,  and 
supplies  the  required  value  to  buy  the  goods.  The  wage  fund  is, 
therefore,  increased  by  these  orders  for  goods,  and  if  every  mer- 
chant orders  new  goods  only  to  the  extent  of  the  profit  he  has 
gained  from  the  increase  in  price  on  the  goods  he  has  on  hand 
we  may 'say  that  the  total  increase  in  value  of  goods  has  thus  been 
advanced  to  make  a new  market  for  them  at  higher  prices.  Sec- 
ondary occupations  then  become  increasingly  active  and  the  con- 
struction of  houses  and  factories  and  buildings  of  every  descrip- 
tion takes  place  and  this  again  increases  the  wage  fund  and  the 
consuming  power  of  the  market. 


85 


This  advance  of  value,  from  merchant  to  manufacturer  and 
from  him  to  labor,  is  not  a pure  loan  from  capitalists,  hut  is  in 
reality  an  advance  from  society  to  one  cla^s  who  gain  an  increase 
in  price  of  goods,  and  this  class  loans  this  value  to  the  next,  who 
then  advance  wages  to  labor  before  goods  are  sold. 

In  the  case  under  consideration  we  have  a fund  of  forty  billion 
dollars^  worth  of  value  to  advance  from  society  to  various  classes 
of  property-owners  with  which  to  create  a new  market  in  propor- 
tion to  the  new  prices  made  necessary  by  this  new  circulation  of 
value.  We  have  now  to  understand  that  as  soon  as  the  investment 
feature  of  property  in  land  is  driven  from  the  market  the  entire 
investing  power  of  surplus  value  must  be  expended  in  the  pur- 
chase of  things  that  cause  a demand  for  labor  in  some  form.  This 
expenditure  must  grow  in  volume  by  the  continual  redistribution 
of  profits  which  will  continually  increase  this  demand. 

As  we  have  repeatedly  shown,  the  present  value  of  land  has 
been  built  up  from  retained  profits  and  has  cost  nothing,  having 
gone  to  land-owners  as  a bonus  from  society.  When  this  value 
seeks  to  return  to  its  natural  channels  it  must  travel  back  in  the 
way  it  came,  according  to  the  law  of  redistribution.  Had  this 
value  never  been  held  out  of  circulation  it  would  have  been  redis- 
tributed to  labor  as  other  profits  were  redistributed,  first  by  in- 
vestment in  secondary  development,  in  new  buildings  and  new 
construction  of  every  kind,  and  this  activity  would  call  labor  from 
primary  production  and  would  have  increased  the  demand  for 
primary  products  at  the  same  time.  This  is  to  say  that  profits  as 
they  accumulate  are  expended  for  construction  when  the  supply  of 
goods  begins  to  encroach  on  demand  and  to  force  down  the  price. 
The  surplus  value  then  goes  into  construction  and  new  develop- 
ment and  takes  labor  away  from  the  production  of  commodities, 
thus  cutting  down  the  power  of  production  in  such  lines  and  in- 
creases the  power  of  consumption  at  the  same  time,  and  restores 
the  market  to  an  equilbrium. 

These  secondary  workmen  engaged  in  building  and  construc- 
tion will  call  out  new  classes  of  workers  in  higher  lines  of  develop- 
ment, as  in  the  arts,  in  music,  the  drama  and  in  professional  serv- 
ices of  all  kinds. 

The  general  fund  of  value  should  go  out  in  greater  and 
greater  proportion  to  pay  wages  as  more  and  more  men  are  called 
from  lower  to  higher  ranks,  and  the  demand  for  common  labor 


86 


should  rise  in  increasing  ratio  because  the  number  of  such  laborers 
should  be  continually  reduced  while  the  demand  for  their  services 
should  continually  increase. 

The  wages  of  common  labor^  which  are  now  the  basis  of  wages 
for  all  labor,  would  have  reached  a much  higher  standard  if  this 
process  of  redistribution  had  not  been  stopped  by  the  rise  in  the 
value  of  land.  In  following  the  redistribution  of  this  forty  bil- 
lion dollars’  worth  of  land  value,  we  must  trace  it  along  the  lines 
it  must  have  taken  had  it  followed  its  natural  paths. 

The  first  effect  of  the  release  of  this  value  by  the  single  tax 
will  be  to  add  this  sum  to  the  general  fund  as  a free  value  ready  to 
])e  distributed  and  advanced  to  pay  higher  wages  to  labor  and 
higher  prices  for  goods  and  materials.  The  circulation  of  this 
value  will  begin  with  secondary  development  because  when  it  was 
taken  from  the  market  it  stopped  secondary  development.  The 
first  symptoms  of  this  increase  of  value  in  circulation  will  be  felt 
by  a great  advance  in  the  value  of  buildings  of  all  kinds.  This  ad- 
vance in  value  will  become  a profit  to  builders,  who  will  then  ad- 
vance value  to  material  men  and  from  these  men  the  new  value 
will  flow  to  manufacturers  and  laborers.  As  an  example,  we  will 
illustrate  with  a dwelling  costing  $1,500.00  to  build  upon  a loca- 
tion costing  $1,500.00,  a total  of  $3,000.00,  and  returning  an  an- 
nual rent  of  $300.00,  upon  which  the  total  value  is  based.  The  loss 
of  $1,500.00  of  land  value  would  leave  this  property  worth  only 
$1,500.00  instead  of  $3,000.00,  provided  there  was  no  gain  in  value 
from  the  general  fund.  But  since  the  annual  rent  is  not  changed, 
the  value  of  this  property  will  not  change,  and,  as  a result,  either 
land  will  refuse  to  surrender  its  value  or  else  the  buildings  will 
gain  the  $1,500.00  of  additional  value. 

A similar  location  can  now  be  had  by  builders  by  the  pay- 
ment of  taxes  in  advance,  which  is  without  cost,  and  since  labor 
and  material  have  as  yet  not  advanced  in  price  a building  costing 
but  $1,500.00  has  a prospective  market  at  $3,000.00,  offering  the 
builder  $1,500.00  in  profit. 

The  immediate  effect  of  such  a prospect  of  gain  would  be  to 
start  a wonderful  activity  in  construction  from  every  community 
all  over  the  country  and  to  send  out  advance  orders  for  material 
of  every  description  greatly  in  excess  of  any  supply  on  hand  and 
any  present  p^'wer  to  meet  the  demand.  These  advance  orders 


87 


could  not  possibly  be  met  by  existing  powers  of  production  and  a 
long  line  of  materials  would  at  once  begin  a remarkable  rise  in 
prices.  This  would  stimulate  every  line  in  the  trades  allied  to  con- 
struction and  would  call  upon  all  other  lines  for  supplies  and 
communicate  higher  prices  for  products  of  every  description.  We 
would  then  discover  that  with  a normal  demand  we  speedily  reach 
the  limit  of  the  labor  market,  and  reach  a point  where  the  anxiety 
of  employers  to  secure  profits  impell  them  to  bid  up  wages  to  the 
highest  price  the  profit  will  permit. 

By  way  of  illustration,  yet  us  assume  that  the  increase  in 
value  of  improvements  calls  out  fifteen  billions  of  our  total  of 
forty  billions  as  a start,  and  of  this  sum  all  but  three  billions  gets 
into  circulation  by  the  demand  for  material  and  other  supplies  of 
products.  We  have  shown  that  when  profits  once  get  into  the 
hands  of  labor  as  wages  they  are  added  to  the  circulation  as  a per- 
manent increase  in  that  fund,  going  from  hand  to  hand  as  a new 
demand  for  goods. 

The  only  method  by  which  this  fund  can  be  diminished  will 
be  by  a decline  in  the  value  of  labor  products.  If  society  could 
not  keep  up  the  supply  of  value,  and  had  but  the  fifteen  billions  to 
spare,  the  prosperity  in  the  market  would  be  followed  by  a decline 
in  prices  during  which  property  would  take  out  its  own  share  of 
the  fifteen  billions  and  products  would  take  their  share.  But  we 
have  an  additional  supply  of  value  of  twenty-five  billions  to  feed 
into  the  market  as  fast  as  the  first  impulse  is  distributed  and  hence 
as  fast  as  wages  require  twelve  billions  to  go  into  circulation 
twelve  billions  of  the  twenty-five  are  paid  out  to  sustain  the  mar- 
ket value  of  buildings.  In  this  way  the  entire  fund  gets  into  its 
many  channels  of  distribution  and  allows  wages  to  rise  to  the  nat- 
ural limit  and  take  up  all  the  value  they  sustain  by  their  industry. 

That  this  is  the  path  of  circulation  becomes  more  evident  as 
we  recall  the  method  by  which  the  value  of  labor  is  fixed  by  society. 
We  have  been  in  the  habit  of  believing  that  the  value  of  labor  de- 
termined the  price  of  products  and  that  the  value  of  buildings  wa: 
fixed  by  the  value  of  the  labor  and  material  used  in  construction. 

But  this  is  decidedly  false,  and  the  truth  is  just  the  opposite. 
Wages  are  determined  by  the  value  society  places  upon  the  prod- 
uct and  if  this  value  is  taken  up  by  property  in  land  wages  must 
remain  stationary  or  decline  to  the  lowest  limit  as  prices  decline, 
and  they  may  advance  only  from  an  advance  in  value  of  products. 


88 


3112  062 


70094 


Another  point  of  importance  is  found  in  the  law  by  which  the 
market  depends  upon  the  consuming  power  of  wages  to  buy  back 
the  products.  According  to  this  law,  the  market  will  compel 
profits  to  return  to  labor  or  clog  the  wheels  of  circulation  and 
wages  must  rise  to  take  up  all  profits  save  such  a sum  as  is  re- 
quired to  carry  forward  development. 

It  is  worth  while  to  note  that  unless  the  value  of  land  returns 
to  increase  the  value  of  improvements,  of  commodities  and  of 
wages,  the  single  tax  will  fail  because  it  will  not  effect  property  in 
land.  The  advocates  of  the  single  tax  claim  that  this  system  of 
taxation  alone,  without  considering  what  may  become  of  land 
value,  will  bring  down  the  value  of  land,  but  this  is  a serious  mis- 
take. They  argue  that  where  land  is  now  improved  to  its  full 
capacity  the  tax  taken  off  of  the  improvement  will  offset  the  in- 
crease in  tax  on  the  location. 

We  come,  then,  to  the  question  and  ask,  “Why  will  the  value 
of  land  decline  in  such  cases 

Any  improver  who  sought  land  that  was  forced  upon  the 
market  by  higher  taxes  could  afford  to  pay  the  value  of  that  land 
provided  the  improvements  cost  no  more  than  they  now  cost.  Or, 
conversely,  take  the  new  Stock  Exchange  Building  in  Chicago  as 
an  example  of  a location,  fully  improved,  as  it  is  by  a modern  office 
building.  The  present  value  of  this  location  is  about  two  million 
dollars,  or  more,  and  the  value  of  the  improvement,  let  us  assume, 
cost  one  million  dollars.  Under  a single  tax  the  income  would  not 
be  changed  by  an  increase  in  taxes  nor  would  the  rents  be  dimin- 
ished unless  business  declined  or  other  buildings  as  well  located 
were  built  at  once,  and  similar  locations  are  not  to  be  found  in 
Chicago. 

How  is  the  single  tax  to  prevent  the  owner  receiving  three 
million  dollars  for  this  property  ? And  if  the  building  can  be  re- 
produced for  one  million  dollars,  the  two  million  dollars  will  re- 
main as  a land  or  location  value. 


Anderson,  Ind.,  Dec.  11,  1900. 


